If you’re a first-time buyer, or haven’t recently gone through the process of making an offer, this article is for you. In this article I hope to alleviate some of the stress and mystery surrounding the process of offering on property. All too often I find that buyers, by no fault of their own, are misinformed about the Agreement of Purchase and Sale and what it accomplishes; I’m here to set the record straight!
In the province of Nova Scotia, consumers have wonderful protections put in place by the Real Estate Trading Act of 1996. Our act is so good and so comprehensive, that other provinces and jurisdictions have copied it. Without getting into too much boring detail, you should know that it is in place primarily to protect you, the consumer (in part through the regulation of me, the REALTOR®!)
Let’s cut to the chase. One of the results of the Real Estate Trading Act was better, standardized forms, such as the Agreement of Purchase and Sale. This form outlines to the seller the price that you (the buyer) are willing to pay ONLY in the event that a certain terms and conditions are met, to your satisfaction, by a certain date. It is by no means a commitment to purchase until these conditions have been met to your satisfaction.
I won’t cover every single condition in this article (besides, every situation is different), but I will hit on some of the major considerations that most buyers will come across. Please note that this is not to be taken as advice for any particular situation, these determinations must be made on a case-by-case basis. That said, here are a few examples of what protections you can put in place to ensure what you’re buying is to your liking:
- Financing – your offer is subject to your ability to obtain adequate/acceptable financing, at a specified interest rate.
- Home Inspection – you are entitled to conduct a professional or informal inspection of the property to ensure it meets your standards.
- Water & Septic Tests – you may wish (or be required by your financer) to inspect/test water and sewage systems on the property.
- Lawyer’s Approval – the offer is subject to the approval of your legal counsel; this could, for example, include verification that there are no liens or other encumbrances on the property.
- Permits – especially important for vacant land purchases, your offer is subject to verification that building, septic, driveway and/or other permits are obtainable.
- Insurance – most offers should be subject to ensuring that suitable property insurance is obtainable on or before the closing date.
As you can see from this partial list of conditions, a lot of things can affect your willingness (and/or ability) to purchase a property. That said, I’d like to re-iteriate that even though you are offering a certain price for the property, and may come to an agreement on this after some negotiation with the seller, you are not committing yourself to the sale until these conditions have been met. I generally recommend that buyers set one date for all conditions, usually 7-14 days after the offer is accepted, to accomplish these tasks. Should anything fail within this time (for example, the building inspection reveals asbestos and you need to back out based on this), the offer can be legally nullified and any deposit returned.
To summarize and re-enforce, the Agreement of Purchase and Sale is in place to protect you and your interests, and to a lesser degree, those of the seller. It allows you to work out a purchase price with the seller, but perhaps more importantly, ensures that no-one else can step in and purchase the property from under you. This is especially important if you are bidding on a foreclosure or other high-demand property. If you’re in this sort of situation, get your bid accepted early to protect yourself from other buyers.