If you’re new to the real estate process, part of the education you should receive from your Realtor is a review of standard conditions (and clauses!) that the Agreement of Purchase and Sale typically includes. These can vary relative to each property or circumstance, though there are a handful of conditions that are very commonly included in an offer for the benefit of the Buyer. Whether you’ve already learned about these details in conversations along the way, or are circling back to better understand the process now that you have secured an accepted offer, I’d like to outline these details for your information and reference:
Financing – Once an offer is accepted, the purchase agreement paperwork is forwarded to your lender to secure firm and fully approved financing for the property. A thorough preapproval should help this process remain pretty straight forward as your application and credit check should be complete by this stage. The lender will request a copy of the MLS data to submit to the underwriter, and the lender may also request an appraisal to be done to ensure that the requested loan is not beyond the value of the property. This verifies that, in the unfortunate event of mortgage default, the lender will not be left with a debt or liability that is larger than the home’s value. Upon completion of the lender’s diligence, a letter of commitment will be issued, outlining the details of the mortgage, including term, rate, and other specifics. This process often takes about 5 business days, but can be done quicker in some cases.
Home inspection – Buyers can decide whether they’d like to hire a certified home inspector to examine the components and structure of the home, ensuring that there are no major issues to be mindful of. From attic insulation to foundation integrity… from proper window function, to plumbing leaks – the inspector will take a close and careful look to determine that all systems are a go. Should a major problem or deficiency be revealed that you were previously unaware of, you have the option to walk from the deal, or renegotiate with the Sellers based on added costs you may be required to incur.
Insurance – You’ll need to call your insurance company to inquire about a policy to insure your home from significant damage, fire, or other potential issues. A good place to start is the company that insures your vehicle as discounts are often offered for bundled services. When obtaining a quote, the service representative will likely have a long list of questions for you about the property. To answer these clearly and accurately, ensure that the listing details and home inspection report are close to reference.
Condition of Sale – Sometimes, a purchase is subject to the sale of the Buyer’s existing property. This ensures a Buyer is protected from owning two properties in the event that the purchased property is required to close before the existing home is sold (In some cases, this would not be possible if the equity of the existing property is required to fund the new one… if it’s not sold, this could leave the Buyer is quite a predicament in the event that financing to close on the purchase cannot be obtained). This condition typically outlines the address of the ‘back-up’ home, as well as the timeline requested for this sale to be completed. Usually, there is also a secondary clause that allows the Seller to continue marketing the home, as well as instructions for what would happen in the event of a second offer being received, and how long the first Buyer has ‘first right’ to the property before getting ‘bumped’ by another Buyer’s offer.
Lawyer’s Review – A Buyer or Seller may wish to have their legal representative review the terms and conditions of the offer. This tends to be more common when one Realtor (or firm) is representing more than one client, and ensures that all parties are protected to move the contract ahead in a positive direction.
Status Certificate Review – When purchasing a condo, the details pertaining to the condo corporation’s financial wellbeing, ongoing care and maintenance, as well as rules and regulations are gathered in a document called the Status Certificate. If this document is not readily available to review prior to an offer presentation, the Buyer may choose to request an updated copy from the condo corporation. It can take up to 10 days for this to be prepared, after which the documents are sent to the Buyer’s lawyer to review, ensuring that there are no major issues such as special assessments, irresponsible management, pending lawsuits or legal claims, or bylaws that don’t suit the Buyer’s lifestyle. In the event that a discovery is made that is unsatisfactory to the Buyer, the contract can be cancelled or renegotiated.
Typically, conditions are included for the benefit of a Buyer, and a timeline is established for these tasks to be completed. A buyer can waive their right to these conditions should they choose. In the event that all conditions are fulfilled without any issues or concerns, a document called the “Notice of Fulfillment” is submitted to the Seller, suggesting just the conditions outlined in the offer have now been officially fulfilled. This subsequently removes the conditions from the offer, thereby creating a firm and binding contract. In the event that changes are required, another document called an “Amendment” is often drafted which often removes the conditions but adds new terms to the contract to satisfy the Buyer and Seller. In an unfortunate circumstance of a condition not being fulfilled, the contract becomes null and void, and the deposit held from the Buyer is returned.
It is important to remain mindful of the deadline by which you are due to fulfil the conditions in your offer. Your realtor will work with you to keep you on track with this timeline. Don’t be afraid to ask questions, and be sure to remain diligent during this process so that the business pertaining to your home purchase will not be put in jeopardy. Working with a strong team of professionals will help to ensure that no detail slips through the cracks – an organized lender, a conscientious home inspector, a savvy lawyer, and a professional Realtor are just some of the individuals who will advocate, protect, guide, and represent you through each stage of your home purchase.