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Ready to Buy?

Hello loyal Edmonton Bloggers, I found this information on the CMHC website (www.cmhc-schl.gc.ca) and thought that it would interest all of you. This is the seventh article in the series.

Making an Offer to Purchase

Offer to Purchase: A written contract setting out the terms under which the buyer agrees to buy the home. If the Offer to Purchase is accepted by the seller, it forms a legally binding contract that binds those who have signed it to certain terms and conditions.

Once you have found the home you would like to purchase, you need to present the vendor with an Offer to Purchase or an Agreement of Purchase and Sale. As your home is probably your biggest investment, it would be wise to work with your real estate agent and/or a lawyer/notary in preparing your offer. Remember that the Offer to Purchase or Agreement of Purchase and Sale is a legal document and should be carefully prepared.

Any offer or agreement will typically include:

  • Your legal name, the name of the vendor and the legal civic address of the property.
  • The purchase price offered.
  • The chattels that will be included in the purchase price (for example, window coverings, appliances). Whatever items in or around the home that you think are included in the sale should be specifically stated in your offer.
  • The amount of deposit.
  • The closing day (date you take possession of the home) — usually 30 to 60 days from the date of agreement. It can also be 90 days or longer. Generally, an Offer to Purchase obliges the purchaser to take possession of the house and property on a certain date. As of the closing date, the purchaser is responsible for taxes, utilities, repairs and maintenance.
  • Request for a current land survey of the property.
  • Date when the offer becomes null and void — that is, it is invalid.
  • Any other conditions that go with the offer, including property inspection and approval of mortgage financing.

The process of making an offer, receiving a counter-offer and then revising it again is not uncommon. The whole process can seem like a roller coaster ride — exciting, but stressful. It’s all part of making the deal work best for you and the vendor.

Steps for the Offer to Purchase

When you make an Offer to Purchase, your real estate agent or your lawyer/notary will most likely add certain conditions to it, making it a conditional offer. This means that the contract will only become final when the conditions are met. The following three conditions are generally standard in an Offer to Purchase, especially for first-time buyers:

  1. A satisfactory home inspection report
  2. A property appraisal
  3. Lender approval of mortgage financing to finance the purchase

Once these requirements are met, the conditions are removed and the Offer to Purchase becomes final.

Home Inspection

It is always a good idea to have the home you are buying inspected by a knowledgeable and professional home inspector. The inspector will go through the property and perform a comprehensive visual inspection to assess the condition of the house and all of its systems. When you receive the home inspection report, you and your real estate agent will have to discuss whether the condition of the home warrants withdrawing your offer to purchase or how the required repairs may affect the sale price that was agreed upon. A pre-delivery inspection (PDI) may be a requirement in closing the purchase of a newly built home. Be aware that pre-delivery inspections are fairly specialized and not all home inspectors have experience in this area. Note also, that some builders have policies concerning who may be present during the pre-delivery inspection so it’s best to inquire with the builder during the negotiation of the sales agreement whether or not this is possible.

New Home Warranty Programs

Generally new home warranty programs are provided by provincial and territorial governments, but there are private new home warranty programs. These warranty programs are not available in Nunavut and the Northwest Territories. Check with your real estate agent or lawyer/notary to find out what the new home warranty program in your province or territory covers. Warranty coverage varies from one province and territory to another, but typically covers labour and materials for warrantable items in your new home for at least one year after completion. It is also intended to address structural defects for a minimum of five years, and up to 10 years with some extended coverage options. A dollar cap is common. Make sure that you know what is covered by the New Home Warranty program in your province or jurisdiction. Don’t confuse the builder’s warranty with the New Home Warranty. Before you sign a contract for a new home, contact your New Home Warranty Program office for a list of registered builders in your area. Contact information is provided at the end of this Step.

For Condominiums or Strata Units

To buy a resale condominium or strata unit, you will have to get a satisfactory Estoppel Certificate or Certificate Status (does not apply in Quebec). This should be included as a condition in the Offer to Purchase.

Mortgage Approval

A pre-approved mortgage certificate is not a guarantee of being approved for the mortgage loan. Even if you have a pre-approved mortgage certificate, you must still meet your lender during the conditional offer period to get a final mortgage approval. To ensure that the process goes smoothly, make sure you bring:

  • A copy of the property listing; and
  • A copy of the signed Offer to Purchase

Your lender will update/verify your financial information, and put together the information required to complete the mortgage application. Your lender may require an appraisal and/or a survey. Title insurance may also be required. Your lender will also inform you about the various types of mortgages, terms, interest rates, amortization periods and payment schedules available. Depending on your down payment, you may have a conventional or high-ratio mortgage.

Once the Offer is Accepted

Once all the conditions of the offer are fulfilled or dropped, it is time to start thinking ahead and making arrangements:

  • Give notice to your landlord if you are renting.
  • Start looking at moving options — hiring a professional or doing it yourself.
  • Make necessary address changes (utilities, services, post office).
  • Arrange for property insurance.

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