Terms of an Offer... Explained

Nicole will unravel the process of dealing with an offer as it unfolds. Your offer may be accepted, in which case, you will be one step closer to home ownership! Alternatively, and commonly, your offer might be ‘countered’ or ‘signed back’. This means the seller has made changes to your proposal (most likely the price!) and will suggest different terms instead. This process can go back and forth several times in the hopes of finding an agreement that is acceptable to all parties involved. Regardless of the process, the paperwork can seem overwhelming if you’re unfamiliar with it. See below for an explanation of the standard terms of an Agreement of Purchase and Sale.

Irrevocable – The timeline by which the signing parties are bound by the contract. If an agreement or counter offer is not made by this deadline, the offer becomes null and void.
Completion Date – Moving Day!
Notices – This clause permits the seller and buyer’s representatives to receive notice on their behalf.
Chattels included – Items not bolted, screwed, or nailed to the home which will be included in the sale.
Fixtures excluded – Items bolted, screwed, nailed of ‘fixed’ to the home specified in this section will not be part of the contract.
Rental Items – If a rental contract will be assumed by the new owner, such disclosure must be made here.
HST – If the sale is subject to HST, this clause clarifies how it will be paid – “included in” the purchase price benefits the buyer to ensure that additional funds will not be required. Inserting “in addition to” places the GST onus on the buyer to pay if necessary.
Title Search – Your lawyer will research the history of the home in question and determine whether any root of title objections of fundamental issues exist. A secondary search is completed to research items such as potential work orders, deficiency notices, continuation of present use, and zoning specifications.
Future use – Use of property will be lawful, as set out by zoning by-laws. If the use of the property is expected to change, additional clauses are added ensuring that the buyer will obtain required permits and permission to accommodate the intended purpose.
Title – Assurance that the title is good and free from restrictions, charges, liens, and encumbrances. NOTE exceptions: mortgages being assumed, registered restrictions and covenants, minor utility easements, easements not affecting the property.
Closing Arrangements – Outlines responsibilities of lawyers to ensure duties are delegated and will be completed.
Documents and Discharge – Seller required to produce all property documents (title deed, surveys) within his/her possession.
Inspection – Confirms that buyers have had opportunity to inspect the property, and will receive further opportunity to complete a home inspection.
Insurance – Seller is responsible for insurance until closing. Should substantial damage occur prior to closing, the buyer may terminate the agreement or take the insurance proceeds. Upon closing, the buyer is responsible for retaining new insurance on the property.
Planning Act – Agreement is invalid if property does not comply with the Planning Act.
Document Preparation – Deed is prepared at Seller’s expense, Buyer responsible for cost of land transfer affidavit.
Residency – The Income Tax Act imposes obligation to pay tax on buyer. This clause provides that credit must be given to buyer at closing by seller, or a certificate stating that tax has been paid must be produced. This ensures that buyers are not burdened with tax of non-resident sellers.
Adjustments – Mortgage interest, taxes, utilities are divided based on buyer and seller’s proportionate share. Completion date is the buyer’s responsibility. These adjustments are arranged by the lawyers and are outlined in their documentation.
Property Assessment – If reassessments occur on the property in question, no claim shall be made against any party involved.
Time limits – Timelines stated must be strictly adhered to. If extensions are required, appropriate documents should be filed.
Tender – This clause relates to documents and funds being forwarded, indicating that the party is ready, willing and able to complete the transaction.
Family Law Act – Seller is ensuring to buyer that the consent of a spouse is not required. The Family Law Act sets out rights to spouses when dealing with a matrimonial home – even if he or she is not on title, consent is required for the sale of the home.
UFFI – Urea formaldehyde foam insulation. This low density foam was used in the 1970’s and was later banned in the 1980’s due to health concerns. Newer research suggests that it is not as harmful as initially believed, though not all information is definitive, and if nothing else, a sigma continues to exist. This clause provides disclosure by the seller, indicating that the seller has not used this type of insulation, and that to the best of his/her knowledge, the building does not contain UFFI.
Consumer Reports – The Consumer Reporting Act mandates that disclosure is provided if a consumer report is referred to in relation to a transaction. This clause serves as notice.
Agreement in Writing – Items inserted take precedence over pre-printed wording if a conflict or discrepancy arises.
Time and Date – References refer to the time/date of where the property is located, not the location of buyer or seller if they sign in a different time zone.

It is not uncommon for clauses to be inserted into the offer, making the purchase or sale of your new home conditional upon their completion. If a problem arises as a result of any of these conditions, the offer becomes void. Some common clauses include:

Status Certificate (In the case of a condominium purchase) – a legal document provided by the condo corporation to disclose the financial wellbeing of the condo and outline any areas of concern related to condo fees, or special assessments.
Home Inspection – Always money well spent. A professional inspector will review the systems and structure of the home to ensure, to the best of his/her knowledge, that there are no significant problems with the home that impact its value. From plumbing and electrical, to the roof, insulation, floors, windows, and foundation, an inspector will provide a comprehensive written report of his or her findings. He or she will also check for problems such as mould, obsolete wiring, asbestos, and other hazards that the property in question could be subject to. Jennifer and Nicole can recommend some trusted home inspectors.
Financing – This clause allows time for the bank to be absolutely certain that they will lend you the funds to purchase your new home.
Insurance – Be sure to call a few insurance companies and obtain a quote for coverage.