You’ve listed your house for sale and just received an offer to purchase? Like any legal document, an offer to purchase contains a lot of information and can be complex to understand.
To help clarify the selling process, here’s an overview of the typical details found in an offer to purchase, along with some explanation to make these elements easier to grasp.
What’s the information contained in an offer to purchase?
An offer to purchase is fundamentally a contractual document in which a buyer expresses their intention to purchase a property. It includes the following key details:
The buyer’s information
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The buyer’s identity (full name, contact details, and profession).
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A statement confirming satisfaction with the property’s condition, or a list of required repairs, if any.
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A commitment to apply for a mortgage loan at their own expense.
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The proposed purchase price for the property.
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The terms for the deposit payment (if applicable).
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A clause, if necessary, stating that the offer is contingent upon a successful inspection and/or the sale of the buyer’s current property.
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A request for the declaration of co-ownership (if the property is a condominium).
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A deadline for accepting or rejecting the offer (typically within 24 to 72 hours).
The seller’s information
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A complete description of the property and land (address, land dimensions, and cadastral designation).
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A commitment to deliver the house in the same condition it was in at the time of the buyers' visit.
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A promise to provide an up-to-date location certificate and a title deed.
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An acknowledgment of receipt of the offer to purchase.
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Identification of the seller and their acceptance of the offer (if the offer is accepted).
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A list of items included or excluded from the sale price.
Additional information
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The date of property transfer.
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The date of possession (when new owners can move in).
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A commitment from both parties to sign a deed of sale on a fixed date or, if applicable, within a specified timeframe.
In addition to the purchase offer, there are several interconnected elements and documents, such as the pre-purchase inspection, proof and invoice for major repairs completed, the certificate of location, and the payment of a deposit. The offer is typically contingent on obtaining these documents or achieving specific results. Let's explore these further.
The pre-purchase inspection
It’s not uncommon for a potential buyer to request a pre-purchase inspection. Based on the results, they may ask you to carry out certain repairs before finalizing the deal. Keep in mind that not all buyers are willing to invest time or money into renovating a newly purchased home.
It’s generally in your best interest to accept repair requests if they are minor and don't involve significant costs. However, the choice is ultimately yours, and depending on the cost of the repairs, you have several options:
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Perform the requested repairs at your own expense.
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Complete the repairs in exchange for a higher sale price.
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Refuse the repairs and risk losing the sale.
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Decline the repairs but agree to lower the sale price.
As the seller, if you’d like to take a proactive approach, consider having a presale inspection done by a professional building inspector. This will help identify any necessary repairs before you list the property, reducing the chances of having to lower your sale price later. It can also prevent unexpected renovation projects from delaying the sale process.
It's also important to understand that the offer to purchase is based on what was observed during the buyer's inspection. Any changes to the property or installations after the inspection could jeopardize the offer. For example, replacing new light fixtures with old ones from the garage after the inspection would not be acceptable. If you want certain items excluded from the sale, make sure to clearly state this in the offer to purchase.
Proof and invoice of major work completed
It's also important to keep in mind that a diligent buyer will likely request proof (such as invoices) for any major work you've done on the property.
As you may know, non-compliant work or projects completed by contractors who do not hold a valid license can create significant issues for the homeowner. For this reason, it's a good idea to comply with this request, as it's a fairly common expectation from buyers. As a seller, providing documentation for any work done will help ensure transparency and can prevent future complications during the sales process.
The location certificate
The location certificate must accurately reflect the current condition of the building. If it does not, it is your responsibility, as the seller, to provide an updated version. This document should outline applicable municipal regulations, all structures on the property, and zoning details.
Keep in mind that obtaining a new location certificate will be at your expense. If you're selling a condo, it's recommended to verify the validity of the location certificate from your own documents at the start of the selling process. If needed, you can also reach out to the co-ownership syndicate for assistance.
The payment of a deposit
As the seller, you have the option to request a deposit (a security deposit) from the buyer to demonstrate their seriousness. However, this is not a common practice.
If you choose to go ahead with this, it's important to note that the amount of the deposit should generally not exceed 5% of the sale price. Keep in mind that the deposit will not be paid directly to you. Instead, the notary will hold it in a trust account until the deed of sale is finalized.
Once the transaction is completed, the deposit will be deducted from the agreed sale price. If, for any reason, the sale does not proceed, the buyer can recover their deposit from the notary, unless the contract specifically states that the buyer forfeits their deposit in the event of a failed transaction.
Accept, reject, or make a counteroffer?
As the seller, when you receive an offer to purchase, it will already be signed by the buyer. At this stage, you have three options: accept, reject, or make a counteroffer.
If you choose to make a counter-offer, you will need to send a modified promise to purchase to the buyer. This revised offer will outline the terms under which you are willing to proceed with the sale, such as a higher sale price or the exclusion of certain items from the transaction.
There are no strict limits on the number of offers and counteroffers that can be exchanged; it all depends on the negotiation process between both parties. However, if the offer includes a response deadline, it's crucial to respect it.
What happens after the offer to purchase is accepted if...
...The buyer discovers a hidden defect after the sale?
Even if the house passed the inspection successfully, there is still a possibility that the buyer could pursue the previous owner if a hidden defect is discovered after the sale.
To protect themselves against such situations, a seller can limit or exclude the warranty against hidden defects. If you choose to exclude the warranty, a clause must be included in the contract that explicitly states the sale is made without any warranty, meaning the buyer accepts the property as-is and at their own risk.
However, it’s important to understand that this practice is not widespread for obvious reasons. Buyers typically prefer a contract that provides full protection against hidden defects, as they naturally want security in their purchase.
...You haven’t been totally transparent?
While it's rare, some sellers may choose to conceal information about the condition of their property.
If it is later discovered that this withheld information would have led the buyer to refuse the purchase, you could be sued for misrepresentation (also referred to as "fraud").
In such cases, the buyer has two options: they can either take legal action to cancel the sale or seek compensation. It's always best to be honest and transparent to avoid any legal issues down the line.
...You want to back out from the sale?
Once you've signed an offer to purchase, backing out will be nearly impossible. You can only cancel the sale under two specific conditions: if the other party also wishes to cancel the transaction or if a court mandates the cancellation.
Aside from these two situations, you are legally obligated to go through with the sale. Failing to do so could result in legal action against you.
Are you looking to sell your property?
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