After many viewings, you finally decide to take the plunge and put an offer to purchase. Circumstance may differ from one case to another but there are some commonalities to the terms you need to consider.
1. Purchase Price - probably the most obvious term is the price you want to offer for the property. Your agent should provide you with some comparables that you can use to determine a fair price for the property. Rarely, does the asking (or "list") price reflect the price that the seller is willing to accept. Depending on the market conditions, the seller may underprice the home in hopes that it will attract more buyers to fuel a bidding competition. In more balanced conditions, the seller will usually price the home a bit higher so if the buyer negotiates on the price, they will eventually settle on the price that is acceptable to the seller.
2. Deposit Amount - the contract should stipulate when the deposit amount is due and what type of funds is acceptable. Technically, any amount can qualify as the deposit, even as little as $1. The current practice is often 5% of the offer price.
3. Included items - The seller is entitled to remove any item that is not permanently fixed in the property prior to the buyer taking possession. In order to ensure that there is no disappointment, you should itemize the articles that you expect to be included in the sale of the property, including such things as the stove, refrigerator, washer/dryer, etc. If there are multiple of any given appliance, the items should be enumerated (eg. if there are 2 kitchens, then there may be 2 refrigerators).
4. Possession Date/Time - this is the date that you want to get the keys so that you can move into the home. Usually the time of day in which you can take possession is also stipulated.
5. Adjustment Date - Usually, this is the same date as the Possession date. Your lawyer/notary will use this date to calculate the expenses you need to assume from expenses the seller has already paid. For example, if the seller paid the annual property taxes in July for a full year and you take possession 2 months later in September, they will have effectively paid 12 months of property tax even though you should bear the cost of 10 of those months. The adjustment date is the day that is used to calculate your obligations.
6. Completion Date - this is the date that the title of the property will be passed from the seller to you. Usually this is 2-4 days prior to the Possession date as properties typically have mortgages associated to them and the seller needs time to transfer the mortgage to their new home.
7. Offer expiry Date / Time - your offer should specify a deadline by which both parties agree to the terms. If both the buyer and sellers can't agree to the terms of the contract before this date/time, the contract is essentially null and void. However, this date/time can be extended so long as both parties agree.
8. Subjects - there are a number of other terms that you might want to ensure get fulfilled before you proceed with your purchase. Each property and buyer will have terms specific to their sale but the more common subjects include:
- Inspection : buyer will retain the services of a professional home inspector to determine any deficiencies with the property
- Financing : the buyer needs to ensure that they have adquate funding to purchase the home
- Insurance : the buyer needs to be able to secure insurance on the property
- Title : the buyer needs to see/verify any charges against the property