While your real estate professional’s role is to guide you through the offer process, familiarizing yourself with various aspects of offers will help. For example:
Terms: A term is a detail in the purchase contract that the buyer and seller agree to. Common terms include:
- Possession date: the date on which the buyer will take possession of the property.
- Inclusions and exclusions: Inclusions are those items the buyer wants included in their purchase, typically appliances, security systems, etc., and exclusions are those items excluded from the purchase, for example if the sellers are taking the attached curtain rods or TV wall mount with them. Carefully review the inclusions/exclusions in the buyer’s Offer to Purchase as they may not be the same as what you had in the listing.
- Time for acceptance/expiry of offer: If the buyer put an expiry date/time on their Offer to Purchase, make sure you provide a response or a counter-offer before that day/time. If you don’t, the offer expires, and there is no guarantee the buyer will extend the expiry or submit a new Offer to Purchase.
- Pre-possession inspection: A pre-possession inspection term gives the buyer the opportunity to view the property, with their real estate professional, prior to possession. Such an inspection can help the buyer confirm the property is in substantially the same condition as it was when they viewed it and made their offer.
Conditions: Buyers often place conditions in their Offers to Purchase in order to protect their interests. When the buyer writes a conditional Offer to Purchase, it means they want to buy the property but before making it a firm sale, they want the ability and time to review or confirm information. Financing conditions and home inspection conditions are common for many buyers.
All conditions need to have an expiry date. The buyer will want to include expiry dates that provide them with enough time to satisfy those conditions – or, enough time to determine that they will not be waiving the conditions. When you accept a conditional offer, the deal doesn’t become final until the buyer satisfies and waives their conditions. If the buyers don’t waive their conditions in writing by their expiry date, the contract ends, and you and the buyer have no further obligations to each other.
Deposits: A buyer should provide a deposit with their offer. The deposit amount sometimes demonstrates how serious the buyer is about the purchase. The Offer to Purchase will also include details on who will hold the deposit in trust. It could be the seller or buyer’s brokerage, or a third party, such as a lawyer.
Communication for acceptance: The buyer’s Offer to Purchase needs to be clear about the way in which communication must occur between the buyer and/or their real estate professional, and you and/or your real estate professional. The standard purchase contract in use in Alberta allows for in-person delivery, or communication by fax or email.
Holdbacks: A holdback is when a buyer holds back some of the purchase price until the seller completes certain items or tasks. Common reasons for a buyer to propose a holdback include:
- the seller is in the process of renovating a room in the property, but the renovations are not complete when the buyer makes an offer. The buyer includes a holdback in their Offer to Purchase to ensure the seller completes the work by a certain day
- the seller indicates plans to have the roof replaced before possession day. The buyer includes a holdback in their Offer to Purchase to ensure the seller replaces the roof, at their expense, before possession
- the seller provides an RPR that shows an encroachment and there is no encroachment agreement in place. The buyer may include a holdback until there is a signed encroachment agreement registered on title.
A holdback is a formal agreement between a buyer and a seller; buyers can’t simply decide to hold back funds at closing because they see something they don’t like. If a buyer wants the option of a hold back, they need to include it in the purchase contract and the seller needs to agree to it.