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What you need to know before making an offer on a home

By Helen Burnett-Nichols, BrighterLife.ca

Comments (2)

A couple getting ready to make an offer on a houseWhen you think you’ve found your dream home, you might be tempted to make an offer and sign on the dotted line as soon as possible – but buyer beware.

Once you make an offer, you can’t change it. The seller can accept it, decline it, let it lapse by doing nothing or sign it back with changes, as a counter-offer. Then it’s your turn to accept it, decline it, do nothing or sign it back. An offer can be signed back several times. Even if your offer is accepted with conditions, you can’t change it unilaterally.

Cesia Green, a real estate lawyer with Wall-Armstrong & Green in Barrie, Ont. and author of the real/estate blog, explains that an offer becomes firm once all conditions, such as review by a lawyer, financing and home inspection, are satisfied. To back out of a firm offer, both sides must agree to terminate the contract, she says, and sign a “mutual release.”

However, she says, “if only one side wants to terminate, it is very difficult to force the other side to cancel.”

Although there might be slight differences from province to province and even between urban and rural areas, those in the business say buyers should be sure to consider the following three steps before signing an offer, to ensure that the purchase goes as smoothly as possible:

1. Make sure your finances are in order

Offer prices are generally based on what comparable properties in the area have sold for, taking into account the property’s condition, location and any extras included; a realtor can help you prepare a reasonable offer. Richard Laurendeau, managing broker at RE/MAX Westcoast in Richmond, B.C. says when you’re ready to make an offer, be sure you’ve already obtained financing pre-approval in the price range that you’re talking about. Also, ensure that the funds you need to set aside for your down payment will be ready by closing day.

2. Understand everything you’re signing

Make sure to read the agreement of purchase and sale carefully to see what you’ve agreed to buy, Green cautions. Pay special attention to the section in every agreement that lists fixtures (attached to the property, such as ceiling fans) that are excluded and chattels (not permanently attached, such as appliances) that are included.

For example, she says, you might think window blinds would be left behind, but if they aren’t specified in the agreement, the seller wouldn’t be required to leave them. “It’s very important to be aware of those things because again, you’ll be disappointed on closing day if you’re not sure,” she says. A professional who deals with real estate regularly, such as your real estate agent or lawyer, will be able to guide you through the agreement, Green adds.

3. Ask the right questions

Many provinces are “buyer-beware” jurisdictions. In these situations, says Green, the seller can’t deliberately hide things, but he or she doesn’t have to tell you anything.

Green says there are two types of defects in homes: those that are “discoverable” – that you or a competent home inspector could find – and those that aren’t.

“For example, flood damage covered by paint would not necessarily be discoverable, so if the wood was rotting behind the paint because of the water damage, then the seller would be liable for that damage. Sellers aren’t supposed to hide damage without fixing it,” she says. “But if the seller believes all of the damage was thoroughly fixed, there is no obligation to disclose past issues.”

As a result, home inspections and searches by a lawyer become all the more important. Lawyers conduct title searches through the registry office to discover things such as easements, restrictions and mortgages held by the current owner that could prevent the property from becoming yours, free and clear, or restrict your use of it, says Green. They also do off-title searches for things like outstanding bills for municipal taxes or utilities. While lawyers help guide buyers through the process in all provinces, they are also required to complete a purchase in Ontario – only a lawyer is legally allowed to register a land transfer there.

Buyers should also be aware of the limitations of checks and inspections. For example, home inspectors can’t dig behind walls or move furniture. Still, it’s always better to get an inspection, says Green. “If a defect was discoverable by a home inspector but you skipped an inspection and missed it, the defect would be your problem,” she says.

“It’s great to find a house that you love and there’s nothing more exciting than getting the key to your first house,” says Green. “But it really is important to get all the checks done.”

While buying a property can be exciting, it can be risky to get emotionally connected to it before you have it inspected, have a lawyer conduct searches and make sure your finances are in order. Once the offer is firm, says Green, it becomes a contract. “People think of it as just an agreement, but it’s actually a binding contract,” she adds “So make sure that before you sign you’re really sure and you’re not just getting caught up in the excitement.”

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