An offer to purchase is a contract. Once the seller and buyer sign an offer to purchase, it’s very difficult to cancel it. So, it’s extremely important to read it carefully before signing, even if your broker has already seen it. This article explains things you should be paying careful attention to in order to prevent problems.
Does the seller really own the property?
Before you sign anything, make sure the seller is who they say they are. Anyone who signs an offer to purchase as a seller must have the right to do this, and you’re allowed to ask for identification. You can also do a search at the land register to make sure this person is the true owner.
The seller might also need permission from a married spouse before selling, especially if the home is their family residence. It also depends on their matrimonial regime. In certain cases, this permission is so important that the sale can be cancelled if the other spouse didn’t agree to it. It’s a good idea to get the other spouse’s agreement early on, at the stage of the offer to purchase. This way there aren’t any holdups when you sign the deed of sale at the notary’s office.
Is the property in the offer actually the one you plan to buy?
The offer to purchase must mention everything you plan to buy, so it’s important to be as specific as possible.
The lot number is usually the best way to designate the land. You should be able to find it on the government website Info-lot (French only).
Also, you might be protected by a legal warranty if there are certain issues with the property, for example, a hidden defect. However, if you buy without a legal warranty, you might have more problems getting the problem fixed.
Are the terms of payment clear?
The section on the sale price is an important one in an offer to purchase. Your offer must be very clear about the following points:
- whether you need financing
- what happens to your deposit if your offer is cancelled
- whether the sale price includes taxes (GST/QST)
The offer to purchase must include all relevant information about how you will pay. For example, it must have detailed wording saying that you won’t buy the property if you can’t get the financing you need. For example, you could state that the sale depends on your mortgage meeting certain minimum conditions, such as an interest rate of X% over five years.
Many sellers require a deposit before payment of the final sale price. In this situation, you can ask your seller for a receipt so you’ll have proof of payment. Your offer to purchase can also state that your deposit will be refunded if the sale is cancelled. You and the seller can also agree in the offer to purchase that your deposit will be placed into a special account, called a trust account. A trust account is used to securely transfer sums of money. Notaries, lawyers and real estate brokers often use trust accounts in their work. This prevents the seller from disappearing with the money before the sale goes through.
Some sales are taxable, for example, if the property was used for commercial purposes before it was put up for sale. In this case, it’s important to find out whether the sale price in the offer to purchase includes tax.
Are the selling conditions clearly stated?
The offer to purchase must contain all the essential conditions of the sale. It can even state that the offer will be cancelled if a condition isn’t met. For example, a carefully worded statement can allow you to reduce the purchase price or cancel your offer if the inspection reveals a serious problem.
You can also mention in the offer to purchase that you want to check the following documents:
- updated certificate of location (issued less than 10 years ago and representing the current state of the property)
- declaration of co-ownership
- seller’s declaration
- any leases in effect (for example, for the rental of a room)
Who chooses and pays for the notary?
The offer to purchase can state who will choose and pay for the notary. If the offer does not specify, you as the buyer can choose the notary. You’re also the one who pays the notary fees and any expenses in connection with the deed of sale.
However, the seller can choose their own notary if you and your financial institution only pay a portion of the total purchase price before taking possession of the property. You’ll also have to pay the notary fees in this case.
The seller might have certain costs to pay as well, such as fees for cancelling their own mortgage on the property.
Are the time limits reasonable?
You should provide a specific time limit for the seller to respond to your offer to purchase. The time limit is usually “firm,” which means the offer expires after the time limit is up.
Ideally, your offer to purchase should specify that you’ll take possession at least a month after you sign the offer. This will give enough time for your financial institution and notary to do their work. You might need more time if you buy during the holidays, in June or during a pandemic.
Find out how long each of the following people or institutions needs to do their work: your financial institution to arrange financing, your notary for the transaction, a building inspector for a property inspection and a surveyor for the certificate of location, if you need one.
The time limit in the offer to purchase for going to the notary and signing the deed of sale isn’t usually a firm deadline. This means the offer will still be valid even if you’re a little past this time limit.
There’s a lot to think about when preparing an offer to purchase. Don’t hesitate to ask your broker or notary if something isn’t clear.
For more information, please see our article Cancelling an Offer to Purchase.