What an Offer for Purchase Entails
So you’ve spent some time checking out the best listings on LiveKitsilano.com, you’re spoken with a Mortgage Broker to get an idea of what you can work with in terms of financing and you’re starting to think about putting in an offer on a Kitsilano Home!
It’s an exciting and nerve wracking process, but we’re here to help. Here’s a quick guide to the typical offer process when buying a home, townhome or condo in Kitsilano. The process is pretty much the same for each type of real estate, and we’ll note the differences when the time comes.
Let us know if you have any other questions! We’ve been through the offer process too many times to count and have the experience to lead you through successfully.
Subject Clauses, Firm Contracts and Completion Dates
First a Few Definitions that will help your understanding:
Subject Clauses: These are conditions set out in the contract that must be met before the contract becomes official. These are for the benefit of the Buyer. You are allowed some due diligence when it comes to making a purchase this large.
Terms: Common knowledge known to both the Buyer and the Seller, and listed in the contract.
Subject Removal Date: The date that all subject clauses must be met or removed by the Buyer. If the subjects are removed, the contract becomes firm. If the subject are not removed, the contract dies.
Firm Contract: An official, legally binding contract to purchase the home listed on the contract.
Completion Date: The day the Seller is paid for the property so the Buyer becomes the official owner on title.
Possession Date: The day the Buyer gets the keys to the home. Typically a day or two after Completion Date.
Typical Offer Process When Buying a Kitsilano Home
1. Finding Your New Kitsilano Home
Have you found the home you want to buy? That’s the hardest and most time consuming part! Ideally you have already let us know that you’re in the market to buy (as well as your Mortgage Broker who can give you an idea of your financing), and have gone on tour with us to see the potential homes. It’s always helpful to us to view homes with you so we can get a sense of your interest level and so we can help you to the best of our ability. If we haven’t seen the home, we’ll book an appointment to view the home so we know what you want to buy. We’ll also speak with the Listing Realtor to get a feel for the Sellers motivations, whether there’s any interest from other prospective Buyers, when the Sellers are hoping to close the sale (move out) and any other interesting information about the condo building or home. We’ll also research relevant comps (both currently active listings and recent sales) that give us an idea of the current market value for the home.
2. Writing an Offer to Purchase
Together, you the Buyer and we, your Realtors, will sit down to go through the Offer for Purchase. We’ll explain to you your rights, your responsibilities, the in and out’s of the contract, and the most important factors to consider when offering to purchase a Kitsilano Home.
The information we’ll need from you is: your offer price, your current address, the deposit amount (typically it’s 5% of the purchase price, and is due by Bank Draft as soon as the contract becomes Firm. Therefore, these funds need to be easily accessible and already in your bank account. Mortgage financing does not cover the Deposit), your ideal Completion and Possession Dates, and your Signature and Initials.
Typical Real Estate Subjects
The Offer to Purchase will also list the Subject Clauses. These clauses allow prospective Buyers to do their due diligence on the home, and if something isn’t as it seems, or if something comes up that doesn’t satisfy these conditions, the Buyer can get out of the contract.
The Typical Subjects when buying Real Estate in Kitsilano are:
1. Subject to a Home Inspection. This allows the Buyer to have a home inspection done by a qualified inspector who can go over the property to give the Buyer a good idea of the state of the home and any potential issues that may need to be tackled.
2. Subject to Financing. This allows the Buyer to secure their mortgage and financing so they can purchase the home. Mortgages can’t officially be approved until there is an Accepted Offer, so this Subject Clause gives the buyer a chance to secure that approval (or get out of the contract if the mortgage is not approved).
3. Subject to Reviewing the Title: This allows the Buyer to verify that they are buying the property free of all encumbrances from the rightful owner of the home.
4. Subject to Property Insurance. This allows the Buyer to secure property insurance. This subject is typically used for what could be hard to insure properties (i.e. really old homes).
FOR CONDOS & TOWNHOMES:
5. Subject to Review of the Strata Documents. This allows the Buyer (and Realtor) to go through the Strata Documents, including Meeting Minutes, Bylaws, Depreciation Reports, Financials and other documents detailing the maintenance and financial status of the building. The Buyer may learn that an expensive special assessment will be required in the next 6 months, and may choose to opt out of the contract. This also allows the Buyer to confirm that BBQs are allowed on the balcony, or that cats and dogs are allowed.
6. Subject to Confirmation of Parking and Storage Lockers. This allows the Buyer to verify exactly what parking and storage lot numbers they have and the type of ownership.
5. Subject to an Oil Tank Scan. This allows the Buyer to verify that the property does not have an underground oil tank as they can be hazardous and very expensive to remove. The Seller typically has this removed prior to listing.
Depending on the situation, you may have more subjects (i.e. Subject to Sale of your Current Home) or you may have less subject (i.e. no Subject to Financing if you’re certain you will have the funds by the Completion Date).
Typically, if the property has a lot of interest and is expecting multiple offers, you have to start with your best and strongest offer. This means the best price you would be willing to pay for the unit, and the least number of subjects (since this makes it more appealing to the Seller).
Typical Real Estate Terms
The Offer for Purchase also contains a page of terms, which state common knowledge known between both parties. This includes information about property transfer tax, an agreement that the house will be in clean condition on move in date, an understanding that the house was never used to grow Marijuana (which can seriously damage the components of a house) and other common understandings between the Buyer and Seller.
3. Submitting the Offer
Once we have the offer signed and ready to go, we will submit it to the Listing Realtor on your behalf. Often we will give the Realtor an idea of how we can to the price (i.e. based on market value, the most recent sale in the building, etc) and will give the Realtor any messages you want to pass on (which can include how much you love the house if you want to try and appeal to the emotional side of the Seller). Since every situation is different, we’ll discuss the negotiation tactics we’ll take with the property as we sit down to write the offer.
4. Waiting for a Response
Once the offer is submitted, we have to wait for the Seller’s Response. This could be one of three things:
1. They have accepted your offer!
2. They have denied your offer.
2. The have countered your offer with their own. This could be a change in price, dates or terms. You now have the option to accept, deny or counter back. This process goes on until the offer is officially accepted or denied. With each counter back, we will re-evaluate the situation and you’re expectations.
Once the offer is accepted, we’ll get you started on the next steps, which typically include the inspection, reading the Strata Documents (for condos), securing your Mortgage and more.
If the offer was (unfortunately) denied. We’ll continue looking to find you your new home! Often the offer process gets easier as you go along because you know what to expect and your nerves might not be as high.
As always, let us know what you’re interested in buying and we’ll help you get there!