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Tag: purchase agreement

  • Should I Be Drafting My Own Agreement of Purchase and Sale?

    Should I Be Drafting My Own Agreement of Purchase and Sale?

    Some homeowners or home buyers have contemplated at some point whether they should be buying or selling their home without the help of a Real Estate agent, or privately as it is commonly referred to.

    We are not going to debate the reasons for and against buying or selling privately.  We believe that Buyers and Sellers need to understand the pros and cons of using certain professionals in their transaction, and ultimately, it is entirely up to the individual Buyer or Seller to decide what resources they may or may not want to use for their purchase and sale.

    What we have seen lately is Buyers and Sellers who are completing their transactions privately and are drafting their own agreement of purchase and sale; occasionally using templates and forms from the Real Estate boards and associations, or the similar forms to what Real Estate agents are using.

    There is one positive aspect about using templates and drafting your own Agreement of Purchase and Sale in order to negotiate your private transaction and that is, it is better than a hand-shake after all.  When an Agreement is signed by both parties and consideration is provided, it becomes binding. Which means all parties are now obligated to fulfill the terms and conditions of the said Agreement.

    While the “do it yourself” (DIY) drafting of a contract method may work for purchasing a used car or some simple low-cost items, a home is one of the largest purchases you will ever make.  A mistake or an issue with an Agreement can end up costing you a significant amount should things not play out the way you have expected them to.  

    That is why it is almost critical to have your Agreement reviewed by a lawyer prior to signing. No matter how simple or straightforward you may believe the Agreement to be. We have seen DIY Agreements that missed inclusions of appliances (imagine moving into your new home only to discover the seller took all their appliances while you were assuming they were included). All the way to incorrectly describing the property or land. Ultimately, minor mistakes can become costly in the end.

    But I’m Using the Same Forms Real Estate Agents Do, What Can Go Wrong?

    On a practical level, Real Estate forms are the standard way to contract for a Real Estate Purchase or Sale.  However, there are issues right off the bat with using real estate templates.

    First, most forms are copyrighted and licensed by the Real Estate boards or brokerages. For example, in Ontario, OREA licenses its forms to their members and the OREA purchase and sale form is used as a standard by Real Estate agents across Ontario.

    Even though they are readily available by doing a simple Google search, you may be infringing on copyright or licensing agreements if you are not licensed to use the forms. Second, forms that are found online may be outdated or may have been modified, sometimes in undetectable ways.

    The other thing to keep in mind is that Real Estate agents are licensed, regulated and insured.  When a Real Estate Agent writes up an Agreement, they have been trained to do so through their licensing process, by their brokerage, or through experience of putting together many Agreements.

    They are also insured by an errors and omissions policy. Say your agent made a mistake on the Agreement, which caused you financial damages.   Your agent (or their insurer), would be responsible for any claims and settlements.

    When it is you who writes the Agreement, no matter if it is on a Real Estate form, you are not insured. Therefore, any claims for a mistake you may make, must be paid out of pocket.

    Can I put the Agreement Together and Have a Lawyer Review?

    Yes you can, an experienced Real Estate lawyer works with Agreements of Purchase and Sale on a frequent basis and has the experience to spot any potential issues.   A lawyer can either review an Agreement you have put together prior to signing, or offer to draft an Agreement for you from scratch.

    How Much Will it Cost to Review an Agreement?

    It is probably less than you think.  Especially if considering the peace of mind and potential risks you may be taking. At Deeded, we would be happy to help review and/or draft your Agreement and provide you with a quick turnaround.

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  • Conditions On An Offer:  Why They Matter

    Conditions On An Offer: Why They Matter

    Purchasing a home has a great deal of inherent risk, that is why sometimes buyers and sellers look to mitigate that risk by using certain protections when making an offer. That is where conditions on an offer to purchase come in.

    When a buyer’s offer is accepted by a seller, both parties are entered into the contract. However, when making an offer, either party has the choice to make the agreement contingent on certain factors.

    These criteria, or conditions, are clauses that would void or alter the purchase/sales contract if certain obligations are not met.  These obligations can typically fall under three major categories: home inspection, mortgage approval, and lawyer’s review of the agreement.

    Mortgage or Financing Condition

    It is common sense not to purchase something that you don’t have the money to pay for, that’s exactly the purpose of a mortgage or a financing condition in your offer.  The financing condition clause protects the buyer in the case they are not able to secure a loan. 

    This clause allows the buyer a predetermined period of time (usually 3-5 business days) to secure a lender that will issue a mortgage after the date the offer is accepted. If the buyer is unable to secure a lender that will commit to a loan, the buyer may invoke this clause of the agreement and walk away from the sale with the down payment and no other penalties.

    It is always a good idea to get pre-approved by a mortgage lender prior to putting in an offer.  This process will give you a better idea of what you can afford and what the lender is willing to lend you. Although the clause may allow you, as the buyer, to walk away from the transaction, it is always a good idea to have your mortgage lined up.

    Home Inspection

    A home inspection is one of the most important clauses to include in a closing agreement. This contingency allows the buyer to have a third-party inspect the property after putting down a deposit. 

    The purpose of this condition is to ensure that there are no issues with the property such as damage. However, if something does appear to be wrong, a home inspection contingency allows the buyer several options. They may either request that it be fixed at the sellers’ expense, renegotiate the price to factor in costs of the repairs they would have to pay or ultimately back out of the sale. It’s rarely advisable to waive an inspection contingency, for more information of why home inspections are a must have, visit this blog.

    Lawyer’s Review Condition

    Before entering a binding agreement that may involve a very significant purchase such as a home, it is always wise to have the agreement reviewed by a lawyer.   

    There have been many cases where both buyers and sellers did not understand their obligations under a binding agreement of purchase and sale. Some of these cases have resulted in litigation and heavy financial judgements against buyers or sellers. Having a lawyer review clause in your agreement will allow for a few days to have the agreement properly reviewed, giving you peace of mind.

    Waiving All Conditions in a “Hot Market”

    The Real Estate market has been highly competitive across North America for the past few years with properties often receiving multiple offers and bids in attempts to purchase the property.

    As a buyer, it is ultimately your decision whether you would like to waive or forego any certain conditions in order to make your offer more attractive to the sellers.  For example, a seller would typically see an offer with no conditions more attractive than an offer with certain conditions.  

    Quite simply, it gives sellers more certainty as opposed to having to wait days for all conditions to be satisfied and risking having to re-list their property should the deal fall apart.

    While removing conditions may increase your chances of securing the property,  it comes with taking on additional risks.   For example, if you agree to purchase a property without an inspection and find out there are damages and issues after the fact, those issues become your responsibility.

    Final Thoughts

    When making an offer on a home it’s wise to use an experienced Realtor that can help you ensure you have proper protection. If you have any further questions, rest assured that the Deeded team is here to support you in any way we can. Send us an email and we would be happy to answer any questions you have or provide recommendations to suit your situation.

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