Making an Offer

Paperwork

This section is all about the documents you will be filling out and signing off on when preparing to make an offer on a property.

The main forms that you will need to sign/initial are:

  • Form 801

  • Confirmation of Cooperation and Representation

  • Agreement of Purchase and Sale

  • Schedules

Form 801

This form was created specifically to try to deal with “phantom offers”. What’s a phantom offer you say? A phantom offer is when a listing agent says there are six offers on a property when in fact there are less. The Toronto Real Estate Board (TREB) along with the Ontario Real Estate Association (OREA) had to figure out a way to deal with this growing concern back in 2016 when this practice was becoming more and more prevalent. Their answer to this growing issue was Form 801. Now every person that registers an offer must fill out this form. The listing brokerage must then send a copy of all the forms to OREA after every sale in case a buyer/buyer’s agent wants to confirm the true offer count for a particular sale. 

Unfortunately, not much can be done for the buyer who may have paid too much for the home based on the number of offers they thought they were competing against. Ramifications could be levied on the listing agent though, where steep fines and suspension of license could come into play.

Confirmation of Cooperation and Representation

This form highlights who represents whom in the potential sale, how the cooperating agent (buyer agent) will be paid, and from whom.

Agreement of Purchase and Sale (APS)

This form/agreement is where it all happens. This is where price, deposit, closing date, what chattels and fixtures are included in the sale, etc. This agreement turns into a binding contract once two major things happen. First, all parties need to sign off on the agreement and to the terms discussed in the attached schedules. Second, the deposit is delivered to the listing broker/brokerage. Once both of these two criteria are met, the deal is deemed binding.

Schedules

Schedules are attached to the APS and will supersede what is written in the agreement. There are two main schedules that will accompany an APS.

  1. Schedule A – These clauses and conditions mainly involve things put in place by the listing brokerage. They talk more to things such as deposit trust accounts, interest on deposits, liability for marketing materials, accuracy of measurements, etc.

  2. Schedule B – These are clauses and conditions that you would like to insert into the offer. Such clauses or conditions could talk to how many purchaser’s visits you would like, conditions for home inspections, or financing, or pretty much whatever else we need to add to the offer to speak on your behalf.

Definitions

  • Chattels - Items of personal property, ie. assets that are clearly identifiable and movable. (moveable center islands, TV’s, furniture)

  • Fixtures - Items that have been installed in or fixed to the property, therefore becoming part of the building. (Light fixtures, Bathroom mirrors, etc.)

  • Condition -  A condition is defined as “a requirement that is fundamental to the very existence of the offer.” If the offer has conditions attached to the offer, (ie. home inspection, financing, etc.) these conditions will need to be fulfilled before the offer is firm. Depending on the condition 1-5 days will be agreed to in order to satisfy the conditions. Once the conditions are fulfilled/waived the agreement becomes firm and you have officially bought yourself a new home:)!

  • Clauses - A contingency clause defines a condition or action that must be met for a real estate contract to become binding. A contingency becomes part of a binding sales contract when both parties, the buyer and the seller, agree to the terms and sign the contract.

Offer Night Scenarios

This is all about what to expect on offer night. We’ll be honest as we can be…you will most likely be in a multiple offer scenario on offer night. Ideally part of our job is to help you to create a strong dynamic for you to be successful on offer night. That means most likely going in with a "clean" offer, which ideally means no conditions.

Offers with conditions aren't truly considered unless the offer price is considerably higher than all other offers, but why pay more if you don’t have to? Most due diligence can be conducted prior to offer night, know that. Most likely you will be asked during the offer process to ‘improve’ your offer, which means 'lose conditions'. If we are going into an offer night with conditions, it’s not usually good practice to start crossing out conditions if we haven’t planned to do that from the start.

On offer night, a number of different scenarios will present themselves. Below are the main ones for your review.

Scenario # 1 - Multiple Offer Scenario

A multiple offer scenario is what is known to the general public as a “bidding war”. In this situation, we register an offer on a property and present the offer that night, usually at the seller's home, the agent's office, or by email. Registering an offer simply means sending in a signed 801 form. It’s important to note that we are not telling them what our offer is, just that we will be presenting an offer. In order to be successful in a multiple offer situation, we need to put forward a strong offer. The following are all factors in a solid offer:

  1. Price

    A strong price based on the market value of the home and the number of offers we will be competing against. Note: in the Toronto market most buyers are paying a premium simply because of supply and demand. The good news is, Dave treats your money as his and doesn’t want to spend if he doesn’t need to unless it makes sense to do so. Paying a premium for a good home now will net you a premium when selling that good home down the road.

  2. Closing Date

    Typically going with the closing date that the seller is seeking

  3. Deposit

    A certified cheque or bank draft to accompany the offer in the amount of roughly 5% of the offer price

  4. Letter to the Seller

    Attaching a letter with your photo to an offer allows the seller to put a face to the name, which can only be beneficial to you! If you need some inspiration, let us know! We can pass along some past letters so you can have an idea of what to write.

  5. Condition Free Offers Are Ideal

    That means we would need to work to conduct our own due diligence prior to offer night by having:

    • Your mortgage broker work on your pre-approvals/offer valuation

    • We will run the numbers and advise on what he feels the actual value is for the home (from which you will analyze and discuss further with us)

    • A home inspection to identify any deficiencies. Note: As the market moves faster and faster, we most likely will work from a possible pre-list inspection (listing agent provides) unless the pre-list is terrible.

    • Aetna – call/bring in Aetna for their “blessing” that the house is termite-free (dependent on area)

 

Scenario #2 - 24-hour irrevocable

This is what a number of agents do to bypass a multiple offer scenario. By requesting a 24-hour irrevocable we, as buyers, are essentially giving the seller 24 hours to “shop” our offer around, which could give time for others to register an offer, putting us then into scenario #1 of multiple offers. Sneaky listing agents! 

It’s important to note that the seller's agent can’t tell any other interested parties what our offer is, only that an offer has been registered. Good agents, who are working for their sellers, will call all interested parties to let them know an offer has been registered. As long as the sellers are holding the offer (haven’t signed it back to us, yet) they are able to accept any other offers that could come in. If another offer is accepted into the process, we will be informed, and we will then be in a multiple offer scenario.

If the sellers sign back the offer to us, and no other offers have come in, then the ball is in our court to accept or counter. If we counter, we again possibly open ourselves up to another offer that may come in at this later stage.

 

Scenario #3 - No other competing offers, just us and the seller

No other competing offers, just us and the seller. In these situations, we can actually negotiate a price that is fair to all. We will need to work within the irrevocable time noted in the offer. Everything is negotiable from the price to the closing date to the conditions themselves!

 Let us know if you have any questions about any of these scenarios. We will go over this in more detail when we are actually in the offer stage but it’s important that you start to understand what can happen on offer night.