You’ve done the hard part, listing your home, preparing it for sale, and opening your doors to prospective buyers. Your hard work has finally paid off and you’ve received an offer! Understanding the offer is one of the most important parts of the transaction process.
Make sure you understand the various terms and obligations in the offer, or the Purchase and Sale Agreement. Knowing what options you have in the negotiations helps you not leave money on the table.
The main part of the agreement is Form 400. This form gives the details of the agreement and may include various schedules. The schedules are posts more specific to their client’s needs.
Some schedules are vacant land condominium mobile home income properties, but there are also schedules to deal with extra conditions for water and septic sale of purchaser’s property and leased equipment.
The first part of understanding the offer is reviewing Form 400. This form outlines the buyer and the seller of the property, the parcel identification number, and the offer amount.
This section outlines the deposit. This is the money given by the buyer, along with an offer to show their intent of purchase. It stipulates how much it’s to be when it is due and to whom. This amount applies to the purchase price, but, if the deadline passes, the seller can consider it void.
If the buyer cannot complete the agreement, the deposit and any other claim a seller may have against the buyer remain the property of the seller.
The buyer’s choice to withdraw from the contract is based on whether any of their conditions meet their satisfaction before the condition deadline. After the deadline passes, they would get their deposit returned to them in full without interest or penalty.
This section discusses the closing date (which can be no later than a specified date), and the conveyance of the property to the new owner. By the time the pre-closing happens, the seller has to have the property clean and vacant.
It also says that the buildings, fixtures, and bought lands remain at the risk of the seller until this date. If anything happens to the property, the seller must return it to the state that it was when the buyer put the offer in.
Season 2, Paragraph 4.
People often pay property taxes ahead of time. When that happens, the adjusted amounts and given to the buyer or the seller. These would be things such as any remaining fuel in the oil tank or propane tanks.
If the seller pays taxes ahead of time, then they receive credit from the closing date to the date that they had paid ahead for the taxes.
Section 2, Paragraph 5.
This section describes the type of property deed to be conveyed. A common type is a warranty deed, which is a guaranteed title verified by the lawyers. With bankruptcy, a quitclaim deed may be more convenient. Or, if it is a mini home that is not attached to the property, it would be by general conveyance.
This section outlines the information the seller is required to supply the buyer in order to facilitate the sale on time. The information may include covenants that may affect the property, lease agreements, location certificates, or a property disclosure statement. Realtors also may request copies of taxes and or utilities in this section as well.
The buyer may want to conduct home inspections and review documentation by a specified date, also known as the condition deadline date. During this period, the buyer can confirm financing, get insurance, review taxes and utilities, and/or any other conditions that they feel the need to in order to complete the deal.
The conditions are key to understanding the offer completely. You must be clear on the expectations of the buyer so you can decide if you can meet the requests. New in 2022, the buyer and seller must complete Form 408 when the conditions are to their satisfaction. They both must turn in the form by the deadline, otherwise, the deal will automatically end.
This section has to do with harmonized sales tax. It is the seller’s responsibility to confirm whether the property is subject to HST and, if it is, whether they will include in the purchase price; or, if it’s over and above the purchase price; and how much the property is subject to.
Items included in the home or with the purchase price are in this section. Fixtures are those which require a tool to remove, such as a screwdriver. That includes items such as a built-in dishwasher, shelving, light fixtures, curtain brackets, and blinds on the property.
This is where agents note items that are visible during showings go with the property. The section also notes movable items, and you’ll typically see the fridge, stove, curtains, washer, and dryer, but there is space to include more.
Since no contract covers everything, the form provides a blank space for additional conditions.
This is the lawyer review and typically the first hurdle in the transaction process. The lawyer will review the offer and make sure all the wording and content are acceptable.
Property mitigation refers to the paper-based deed at the Land Registry office. The office will convert the deed and accept it into the land registration data-based system. This is needed when a property changes hands or if a property is re-mortgaged.
There is an added cost to the seller’s lawyer for doing this migration because the lawyer has to do an extensive title search to make sure everything is accurate before acceptance into the database system.
The lawyer will also review the title to the property before closing and raise any objections to information they find.
This section provides a series of miscellaneous provisions. For any monies given, other than the deposit, it must be traceable. Traceable funds may come from a certified check electronic transfer or chartered Canadian bank. There are deadlines for the seller’s responses unless there is a signed agreement to extend the deadline. If the deadline passes with no resolution, it is a breach of the contract.
Understanding the offer is crucial to ensure you know the conditions and deadlines you need to abide by.
Section 11, Paragraph 4.
This paragraph states that buyers and sellers agree to be bound by offers and counteroffers. It also grants permission that electronic submission of documents and their signatures are acceptable.
No amendment to this agreement is in effect unless it is in writing and signed by all parties. If there is a conflict of those amendments, then the newest signed portion shall supersede the previously printed version.
The privacy laws of Nova Scotia govern the agreement. For any disagreement, the courts of Nova Scotia will review. This benefits and binds all parties and their respective heirs, executors, or administrators.
Addendums & Schedules.
Understanding the offer applies to addendums and schedules as well. Make sure you are clear on what these forms are, and the information provided in them. The sections listed make up the main body summary of Form 400, the agreement of purchase and sale. There are addendums and schedules often attached to the agreements, especially in a rural area where there is often a water and septic schedule attached to address drilled wells and septic systems.
The seller has a section on Form 100 to either accept the offer as is, option 2 is they can reject the offer outright, and option 3 is they can make a counteroffer. To show there is an additional counteroffer attached to this agreement, the seller must check a box on the form.
On the counter form, they can detail what they are countering. The seller can counter on price, well inclusions, closing dates, and much more. Once the counteroffer is in the buyer’s possession, they have a deadline to respond. Making sure you understand the counteroffer is important.
However, a buyer cannot counter a counteroffer. If the buyer chooses not to accept that counteroffer, they have to submit a new offer which may put them in a competition. Many times, the ball is in the seller’s court when they counter and there’s a lot of activity on their property because the buyers usually only have one chance to counter.
Understanding the Offer & Acceptance
Once the seller accepts an offer, the first thing the agents will do is forward the purchase sale agreement to the respective lawyers for review and they will send a copy of the fully signed agreement to the respective parties, along with cut-sheet taxes utilities, and the property condition disclosure statement.
From there, the buyer will get to work on meeting their conditions, such as booking the house inspection, contacting insurance for other conditions they may have in their offer. Most buyers’ agents prefer to get the conditions met sooner rather than later just in case anything comes up that they may have to renegotiate or call in a separate tradesperson to inspect.
If the buyer finds something, they may want to renegotiate, and they do have that option before their condition deadline. This requires an amendment requesting what part of the offer they want to amend. Both, the buyer the seller, can either accept or reject that amendment. However, the seller cannot end that offer just because the buyer has sent an amendment.
The seller must help by allowing the buyer to do their investigations until fully satisfied. This may entail uncovering the septic to allow for septic inspection, making sure they can access the attic for an inspection, making sure areas are clear so inspectors can get to the electrical panel, and they may request times for the inspection. If any tenants are on the property, may request documentation such as a lease or rental agreement.
One thing they do not have to provide is a survey or location certificate if they don’t already have one. And, unless specifically asked, they do not have to supply a quote or get a new one. The survey and location certificate are a buyer’s expense within the purchase and sale agreement.
Once all the conditions are to the Buyer’s satisfaction, the Buyer signs off on Form 408 declaring such, and the deal becomes firm and binding. Then it’s time to prepare for closing day!
Understanding the offer is a pivotal part of the transaction process, so make sure you know what information you are looking at and understand what each part is saying.
If you have questions, please let me know! And, if you would like an additional resource, download a copy of my Seller’s Book of Checklists!