You've listed your home and now you have an initial offer. How do you interpret it? Is price the only factor that needs to be considered and should it be the first priority? This article aims to answer some of the questions surrounding the Agreement of Purchase and Sale with a focus on the Ontario market place.
Understanding the Agreement of Purchase and Sale
The ability to interpret an offer and respond to it is imperative to the sale process. In some instances you may have a trained professional to assist in interpreting an offer and assisting you with any counter offers. This discussion focuses on common practices in the Ontario market place however the tips will assist in the interpretation of any offer regardless of geographic location. When you are considering that initial offer to purchase your property I would recommend that you get independent professional advice.
For an agreement to be legally binding it is important to verify that the full legal names of all parties are correct, as well as the legal description, address and lot size. If all this information is accurate and does not need to be altered then you may actually interpret the offer. If this information is in anyway inaccurate then it needs to be corrected and initialed by both the buyer and the seller.
Next I usually recommend looking at the schedule at the back of the offer prior to examining the price and deposit. The conditions in a schedule override any preprinted material in the Agreement and these usually itemize any potential problem areas that may cause the offer to be terminated by the buyer. The conditions in the schedule will give you insight into how serious your potential Buyer is and how you will proceed with negotiations.
There are several conditions that are commonly used in an Agreement of Purchase and Sale and they have several common elements that need to be considered. For starters there is the duration of the clause. The longer the conditional period is the longer it prevents you from accepting other offers. The condition also allows the Buyer a way to escape from an Agreement of Purchase and Sale without penalty to themselves. Each condition should be carefully worded and read because subtle changes to wording in a clause can drastically change the implications of that clause.
Some common conditions in residential resale are financing, insurance, and home inspection. With rural properties there should be a condition concerning potability of the water supply and possibly a warranty concerning the septic system. A sample of water should be taken at closing and so potability can be confirmed usually within a couple of days. These are just some of the more common conditions that are found in Agreements of Purchase and Sale there are various conditions that will sometimes appear and they need to be examined and considered individually.
Now you are able to look at the price being offered. Is it a number that you can accept? Is there a deposit? If not the offer should be signed back and include a deposit. Depending on your geographic location and the activity in your area will depend on the type of deposit you are able to demand. Does the closing date give you an acceptable amount of time to find new accommodations? Does the offer have any inclusions or exclusions that you were not planning on?
If at this point you have reviewed the Agreement and find it acceptable you have what is known as a conditionally accepted offer. If you find the offer unsatisfactory you need to alter the offer initialing any changes that you make and sign it back to the buyer or you can refuse the offer altogether. Any of these options have their own risks associated with them and you as a seller need to seriously consider the risks and benefits prior to making a final decision.
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