Archive for the ‘Offer to Purchase’ Category

Make a Conditional Offer Work For You

Tuesday, November 13th, 2012

Make a Conditional Offer Work For You | Spruce Grove Stony Plain Parkland County Real Estate | Barry TwynamAfter looking at many houses in Spruce Grove, Stony Plain, Parkland County or the Edmonton area, you finally find one that meets your needs.  But before you offer to buy the property, you realize you have questions that need to be answered.  Does the house need repairs that you couldn’t see during your visit, such as worn-out shingles or a leaky basement?  Will you be able to put financing in place?  Will you be able to sell your present house before taking possession of the new one? 

Real estate purchase contracts often contain buyers’ conditions; that is, things that the buyers spell out as needing to be satisfied before they go ahead with purchasing the house.  If the sellers agree to the terms, then a deal is made.  The deal will be finalized and the house considered “sold” when all conditions have been removed. 

Here are some of the most common conditions you as a buyer might put on the sale:

  • Financing Condition:  If you are able to obtain a mortgage, you will buy the home.
  • Property Inspection Condition:  If a qualified home inspector that you as the buyer have chosen to review the home declares the home free from major defects, you will buy the home.  Should your inspector discover something that you are not prepared to live with, you can choose not to waive this condition, meaning the deal is dead.  Or, you may ask your realtor to renegotiate a lower price, money for repairs, or the actual repair itself.
  • Sale of Buyer’s Home Condition:  You specify a date by which your home must be sold in order for you to take on ownership of the new home.  If your own home is priced well and has a reasonable chance of selling within the allotted period, say 60 days, sellers will often agree to this condition, especially in a slow market.  (You should be aware, however, that a seller may put a condition on the condition, such as retaining the option to sell to someone else if you are unable to remove this condition within a specified period, such as 48 hours, of a new offer coming in without this condition.)
  • Additional Buyer’s Conditions:  This could be anything that the buyer would like the seller to do to make the home more agreeable, from repainting the home, to replacing the roof, to relocating a storage shed, etc. 

A conditional offer can protect you and make it possible to walk away from a deal if problems arise that you did not see during your initial visit to the home.  But you should be aware that a seller always has the right to refuse your conditions.  It is especially risky to impose conditions when the market is competitive.  More than one buyer has lost a good home because a second offer with fewer or no conditions has been placed before the seller!  This could happen to you even if you are offering a higher price. 

To make conditions work for you, they need to be used in the right way and in the right circumstances.  Your REALTOR® can help you decide whether it is in your best interests to write conditions into a deal. 

Comments or questions about this article or real estate in general?  Call or text me at 780-910-9669, email me at barry@barryt.ca, or contact me here

Questions Home Buyers Ask, Part 3: Writing an Offer

Friday, November 5th, 2010

My clients in Spruce Grove, Stony Plain, Parkland County and the Edmonton area have lots of questions, and I’m happy to answer them!  This article is Part 3 of a series that addresses the most common questions I get from buyers.

Questions Home Buyers Ask, Part 3: Writing an Offer |Spruce Grove Stony Plain Parkland County Real Estate | Barry TwynamHow much do I offer?

This really depends.  Five factors to be considered include:

  • what the current asking price of the property is and how well it is priced
  • if there are other offers competing with your offer to purchase the property
  • how important the property is to you
  • whether the market is a buyer’s market or a seller’s market
  • how long the property has been on the market

This is where the expertise and honesty of your REALTOR® comes in.  You must trust your REALTOR® and feel confident that he or she is providing reliable information.  As part of the services I provide to my clients, we assess the asking price based on comparable sold properties for the area.

Although every REALTOR® will have his or her own negotiating style, there are a few general concepts you should understand:

  • An offer is a combination of these things: Price; Conditions (financing, inspection, etc.); Chattels (unattached goods); Possession date. This combination has value to both the buyer and the seller.
  • There is no magical percentage for offers. For instance, not every offer should be 5 to 10% below the asking price. Some may be less and some may be more; it depends on how reasonable the asking price is.
  • Not every seller HAS to sell his home. Some sellers will be more motivated than others. There are sellers who list their property just to see how much they can get for it, and they may not be willing to negotiate much lower than their asking price. There are other sellers who have to sell, and these may be more willing to negotiate the price.
  • Be prepared to walk away. It is important to decide ahead of time the highest price you are willing to pay for the property, and then be prepared to say no to anything higher.
  • Competing offers require a much different strategy. You will need the advice and experience of your REALTOR® to know how to handle this type of situation.

If my offer is too low, can my offer insult a seller?

In my opinion, yes, it can.  If your offer is too low, a seller may decide that he or she will not even counter your offer.  I do not recommend a low offer if you really want the property.  You do not want to push a seller’s insult button, because then you risk attaching emotion to the transaction.  If you insult a seller, you risk that person refusing to sell you the home at any price.  If you decide to drastically change your offer, the seller could interpret this as desperation and you could end up paying more for the property than if your offer had been more reasonable the first time.

What if I don’t find anything I like in my price range?  Should I look at houses over my price range in case there is a reduction in the price?

Normally, I suggest that it is reasonable to look at homes that are $5000 to $10,000 over your price range, but not more than this.  You will be very disappointed if you find a house that is more than you can afford, and the sellers will not budge on price!  For example, if you are approved up to $350,000, and you are looking at houses in the $365,000 price range, it could be that the houses at $365,000 have already had $30,000 in price reductions.  It could then be difficult to negotiate the price down to $350,000.  My suggestion to my clients is that we assess these properties on a case by case basis.

If I find a house I like, how do I make an offer?

This is where the expertise and experience of a REALTOR® is required.  You can expect to spend approximately one hour getting the paperwork together and signing the “Offer to Purchase”.  Once your offer is made, your REALTOR® will normally present your offer to the seller and the seller’s REALTOR®.  Negotiation typically begins here.  It is important that you are available by telephone or in person in the event a counter offer is made from your offer.  Once the offer is accepted by the seller, any changes to the contract must be initialed by all parties.  All offers must be accepted IN WRITING to be legally binding.

What happens after my offer has been accepted?

Assuming you have placed conditions on your offer, you will have timelines to fulfill these conditions before the property is sold.  The type of condition will determine what is required.  Remember:  conditions must be removed in writing prior to the expiry of the timelines, or you risk losing the property.  Here are some general conditions:

  • Financing condition: Your mortgage broker or bank will need to have the information for your purchase immediately! As a service to my clients, I can fax a copy of the offer, along with a copy of the MLS® listing, to your mortgage broker or bank on your behalf.
  • Home Inspection: A property inspection will need to be booked if a certified home inspector is going to be used. The buyer’s REALTOR® will attend the home inspection.

What are conditions in an offer?

Conditions allow for a set amount of time for the buyer to get things in order.  Conditions also ensure that the buyer’s deposit is protected.  If you cannot fulfill your conditions (for example, your bank will not provide you with financing), then your deposit will be returned to you.

What are some of the standard conditions?

  • Financing Condition: This gives time for the buyer’s mortgage broker to confirm that the lender will provide funds for the purchase.
  • Property Inspection Condition: This gives time for the buyers to have an inspector review the property.
  • Condo Document Review Condition: This ensures the buyers receive the condo documents from the seller and gives time for the buyers to read through these documents and seek specialized advice if needed.
  • Sale of a Buyer’s Home Condition: This allows the buyers time to sell their current property.

How much time do I get to deal with conditions and finalize the offer to purchase?

Typically, you will have 5 to 7 business days to get your finances in order (so make sure you are pre-approved with a lender BEFORE you write an offer!), have a property inspection completed, or review condo documents.

Questions Home Buyers Ask, Part 3: Writing an Offer |Spruce Grove Stony Plain Parkland County Real Estate | Barry TwynamIs there more paperwork after I make the offer?

Usually there is.  If you placed conditions on your offer, you will have to remove those conditions once you have fulfilled them by signing a “Condition Removal” form.  If you have a variety of condition dates, then you may have to sign several condition removals.  Amendments to the contract may be needed as well, such as a change to the possession date agreed upon by the seller and the buyer.

If you don’t see your question here, it might be answered in the Buyers Guide section of my website.  Or, feel free to contact me any time by email at barry@barryt.ca or by phone 780-910-9669.

Barry Twynam, Realty Executives Leading
#1 14 McLeod Avenue, Spruce Grove, Alberta, T7X 3X3
Tel: 780-962-9696 Cell: 780-910-9669 Fax: 780-962-9699
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