The offer to purchase: Everything you need to know
Last updated on October 5, 2022
An offer to purchase, also known as a promise to purchase, is a written document in which a person agrees to purchase a property. If the seller accepts the offer, they must sell the property to the buyer. A crucial step in the real estate purchasing process, this irrevocable contract, which can include several conditions, should not be taken lightly. Learn all that it entails before submitting or accepting an offer!
- What is an offer to purchase?
- The offer to purchase process
- Submitting an offer to purchase and its legal implications
- How to stand out as a buyer amid multiple offers
- How to make an offer without an agent
After visiting several properties, a buyer decides to make an offer on a house that meets all their criteria. The Offer to Purchase document informs the seller of the buyer’s firm intention to acquire the property at a given price, subject to certain conditions.
The buyer and the seller should both carefully read the promise to purchase before signing, as it involves making a formal commitment. Once both parties have signed, it is very difficult for either one to back out.
The official document must be given to the notary to conclude the transaction. You can call DuProprio’s team of notaries if you have any questions about the offer to purchase process, all the way up to the signing of the deed of sale.1
The most common conditions in an offer to purchase
The Offer to Purchase often includes additional clauses, requiring the seller and the buyer to satisfy certain conditions in the agreed timeframe for the property to be considered sold.
The most common conditions are:
- Proof of financing
- Satisfactory inspection
- Sale of the buyer’s property
- Receiving a copy of the declaration of co-ownership (if applicable)
When the offer is conditional on obtaining financing, the buyer must prove that they will have access to the funds needed to purchase the property. To fulfill this condition, they must obtain a mortgage loan commitment agreement with no conditions.
Mortgage prequalification is not sufficient at this stage as it only establishes the buyer’s borrowing capacity. A mortgage commitment indicates the amount granted by a financial institution to purchase the property listed in the offer to purchase.
If the buyer does not obtain this proof within the timeframe agreed with the seller, the promise to purchase may become void.
Satisfactory inspection condition
The offer may also be conditional on a satisfactory inspection. If so, the buyer is responsible for hiring a building inspector to check the condition of the property.
“If the inspection doesn’t reveal any major defects, the condition is considered to have been met. Otherwise, the buyer can withdraw or amend their offer,” explains Elena Maria Bejan, notary at DuProprio.
Sale of the buyer’s property condition
Unless the buyer is purchasing their first home, they will usually also have a home to sell. If so, the buyer can make their offer conditional on the sale of their property.
Both parties must agree on how much time the buyer will have to sell their property. If the buyer is unable to sell within this timeframe, the offer to purchase can be cancelled.
Do you know about the 72-hour clause? If this clause is filled out in the Offer to Purchase, the seller can keep receiving offers as the buyer’s sale condition is not met.
First, the buyer must download and read the Offer to Purchase form, available in the Documents – Offer to purchase and counteroffer section of the DuProprio.com website.
To fill out the document properly, several points will need to be discussed with the seller, such as:
1. The price and the terms
The buyer must indicate the price they are offering for the property as well as the payment terms (point 3 of the Offer to Purchase), i.e. financing, the payment of a deposit and the taxes.
2. Each party’s obligations
The buyer and the seller must declare that they are aware of their obligations (points 4 and 5, respectively). The buyer agrees to pay certain costs and fees, such as those related to the deed of sale, and states that they visited the property and are satisfied with it.
The seller agrees to deliver the property in the condition it was in during the buyer’s last visit. The seller will also give the buyer a valid property title and certificate of localisation.
3. The conditions
Next, the two parties must agree on the terms of the sale (point 6) to complete the Offer to Purchase document. They will need to discuss the occupancy date, the date the deed will be notarized and the inclusions and exclusions.
Finally, the buyer must decide how long the seller will have to respond (point 9). Once all the sections have been filled in, the buyer signs (point 10) and gives the Offer to Purchase to the seller.
5. Fulfillment of the conditions
The period within which the conditions must be met starts the day after the seller accepts the offer or counteroffer. Finally, the property is considered sold as soon as all the conditions have been met!
When the offer is in the seller’s hands, it is too late for the buyer to change their mind, legally. This is why it is strongly recommended that buyers only make one offer at a time, as there is a real risk of being bound to purchase two properties! Backing out of an offer to purchase is only possible in a few instances. The law provides for a few exceptions that can also lead to the cancellation of the sale.
It's wise to be well-informed before submitting an offer!
Upon receiving the offer, the seller can accept it, refuse it or make a counteroffer (point 11). If the seller accepts the offer, the Offer to Purchase becomes a contract. If the seller refuses the offer or does not answer within the specified timeframe, the offer becomes void.
The seller is usually given between 24 and 72 hours to respond. During this time, they must review the offer and can discuss it with experts like DuProprio’s team of notaries1.
Making a counteroffer
If the seller disagrees with certain points in the offer, they can make a counteroffer. If the buyer accepts it, the initial offer to purchase remains valid, but with the amended points.
Sometimes a seller will receive several offers at once. Even if a buyer submits their offer first, this does not mean that it has priority over those that follow. It is the seller who decides which offer they prefer, or who refuses the offer(s), within the agreed timeframe.
Enhancing the offer
In the meantime, a buyer can “sweeten” an offer they have already submitted. As long as the seller has not accepted an offer, a buyer can make their offer more competitive by increasing the amount they are willing to pay or changing the conditions.
Add a cover letter
In a context in which the seller is likely to receive multiple offers, one of the ways a buyer can appeal to them is by writing a cover letter. It should list the reasons the buyer fell in love with the property. Since not all buyers do this, an offer that comes with such a letter will stand out.
When buying without an intermediary, the buyer and the seller communicate directly. Despite what some believe, real estate transactions have the same legal obligations when carried out with or without an agent. In addition, the legal warranty applies automatically unless stated otherwise.
Fortunately, filling out an offer to purchase is not very complicated provided you follow the steps. This is why easy-to-complete forms are available to buyers and sellers on DuProprio.com in the Documents – Offer to purchase and counteroffer section. Property owners who decide to sell with DuProprio's help have access to legal assistance over the phone1 to help them understand and go over the terms of one or more of the promises to purchase they receive.
Unlike with a real estate agent, who cannot disclose the amount of the offers received, an owner who decides to sell without an intermediary is free to decide whether or not to disclose this information.
Finally, by choosing to conduct the proceedings without an agent, both parties can negotiate directly. Filling out the Offer to Purchase form together can be an effective way to do so. The parties can avoid back-and-forth offers and counteroffers by preparing a single document. What is more, the transaction will be carried out at a pace both parties feel comfortable with, with no added pressure.
An important but doable step
The submittal of an offer to purchase is a critical moment in a real estate transaction. Given that it is a contract that legally binds the buyer and seller, careful thought must be given before taking each step. With the right tools and support, the offer to purchase process can go smoothly.
To understand how DuProprio can be your ally in real estate transactions, call us at 1-866-387-7677 or watch our informational video.