After viewing numerous homes, you have finally found the “perfect” home. There are feelings of both excitement and anxiousness. It is time to submit an offer. This critical part of the buying process has significant ramifications. In today’s complex and rapidly changing real estate market, it is imperative you have a realtor that will protect your most prized investment.
This article will discuss the essential clauses that should be part and parcel of any offer.
All offers will spell out the usuals-offering price, deposit and closing date. However, there is much more that needs to be incorporated into your offer to make sure your interests are fully protected.
If you are looking to secure a mortgage and have a pre-approval from a financial institution, it would still be prudent to include a financing condition clause. The typical time frame is 5 to 7 business days. If for whatever reason you couldn’t arrange financing, then your deposit would be returned in full. Often times a purchaser mistakenly believes a pre-approved mortgage is a guarantee of a mortgage approval. If you review the fine print you will notice most pre-approvals have many conditions. If these conditions are not met the final mortgage approval may not be granted.
Another imperative condition to include in an offer is a home inspection clause. This clause allows the purchaser the right to hire a professional home inspector who will conduct a home inspection of the subject property which typically takes 2 to 3 hours. The inspector will review the major components of the home including the roof, the furnace, electrical system, plumbing and exterior foundation. If for whatever reason the purchaser is unhappy with the outcome of the inspection he can nullify the transaction. Often times if a home inspection reveals a deficiency the purchaser may obtain an abatement (price adjustment) from the vendor.
An often overlooked clause is the chattel warranty clause. This typically applies to the appliances and ensures that the appliances remaining on the premises will be in good working on closing. If an appliance is not working you will have legal recourse against the vendor. In many instances no mention is made of chattel warranties and the purchaser is at risk should the appliances not be operative.
The right to view the property one or two further time(s) should be inserted in the offer. This allows the purchaser the opportunity to visit the property prior to closing typically for the purpose of taking measurements or showing the property to other family members. In many cases it is advisable to have the purchaser view the property just prior to closing to ensure that there are no significant changes in the condition of the property. The purchaser is in a position of strenght prior to closing and should any problems arise it is easier for the purchaser’s lawyer to remedy the situation.
Typically, a survey is required by both the solicitor and the lender. Therefore you should include a survey clause to satisfy both of these parties. In the event a survey is not available you can still obtain title insurance which will guarantee you “good title” to the property. Prior to title insurance, if a survey wasn’t available then either the purchaser or vendor would’ve had to bear the cost of a new survey. (A survey is the accurate measurement of both land and building made with the aid of instruments.)
If you are buying a condominium you want to ensure the sound financial health of the condominium corporation. Any offer should be conditional upon obtaining a status certificate from the condominium corporation and having your lawyer review and be satisfied with such documentation. This certificate highlights many important aspects of the condo corporation such as the current amount of money in the reserved fund, if there are proposed increases in the maintenance fees, if there are any special assessments being contemplated, and the outcome of any engineering studies determining the adequacy of the reserve fund.
I have seen situations arise where special assessments in excess of $10,000 are levied against each unit owner. By reviewing all pertinent documentation this will ensure there will be no costly surprises.
If you are unsure or uncomfortable about any aspects of the offer you may want to include a clause stating that it is conditional upon your lawyer reviewing the offer and being satisfied with the same, failing which the offer shall become mull and void. This will allow your lawyer the opportunity to review the offer and if any changes need to be made your lawyer can make such changes to the agreement of purchase of sale. If the other side objects to such changes then you can void the agreement. This will give you peace of mind when you are submitting your offer.
Each offer is unique and consequently conditions and clauses will vary. However, the clauses discussed in this article are viewed as indespensable clauses and should be (when applicable) incorporated in your offers!