There’s no doubt that buying a home is exciting, but the process can also be stressful. One of the most potentially confusing steps for many buyers is making an offer to purchase. From the elements you should include to what happens after your bid is submitted, there’s a lot to know. With that in mind, I’m hoping to help demystify the process here.
If you’re preparing to buy a home, here’s what you should know about making an offer to purchase…
The basics: what to include
There are a few elements that every offer should contain. In addition to your legal name and the address of the property you’re hoping to buy, here’s what you should include.
• The offer amount
• Deposit amount
• Closing date
• Offer expiration date
• Other conditions
Choosing a dollar amount
When you’re deciding how much money to offer for a home, there are a few things to consider. While you want to get the best deal possible, you also need to ensure that your bid is attractive to the sellers involved.
It’s a delicate balance, but an experienced agent can help you figure it out. They’ll look at local real estate trends, along with the specifics of the home you’re considering (such as perceived flaws and recent upgrades). Crucially, they’ll also analyze recent sold and asking prices for very similar properties in the area surrounding the home you want to buy.
Adding conditions
Of course, an offer is more than just a dollar amount. There are other elements to consider, such as the home-buying conditions you want to include (if any). These are stipulations stating that your purchase won’t be completed unless certain events occur. For example, you can make your deal contingent upon a successful inspection or your ability to obtain mortgage financing.
Home-buying conditions can protect you, as they allow you to back out of the deal under certain circumstances. That said, omitting them can make your offer more attractive to sellers (especially in a multiple-offer scenario).
The irrevocable period & offer presentation
Offers aren’t valid indefinitely. The seller has a set period of time to take action—which is usually somewhere between a few hours (typical in Toronto) and up to three days (in rare cases). This is what’s known as the irrevocable period. Once it’s over, you’re no longer committed to the terms of your offer.
After your bid is registered, the next step is presentation. Your agent will set up a time with the seller and their agent to explain your offer. This process can take place either face-to-face or digitally (the latter is a better option during a pandemic). You won’t be directly involved, but you should be prepared for the possibility that the seller will want to start negotiating right away.
Negotiation process
Once your agent presents your offer to the seller, there are three steps they can take. They may accept it immediately, though this doesn’t happen often. They can also reject it out of hand (if, for example, they think it’s way too low or have received significantly better offers already). Lastly (and this is what happens more often than not), they can counter it by proposing new terms.
When the latter happens, you’ll enter into negotiations. There may be several rounds before you reach a conclusion. An experienced agent will know how to leverage local data and an understanding of seller psychology to get you the best deal possible. If there are other offers on the table while you’re negotiating, your representative should also have the skills to manage your expectations and make things as low-stress as possible.
Once you’ve reached an agreement and your offer is accepted, you’ll need to submit your deposit within 24 hours. From there, both sides—you and the seller—will need to fulfill any conditions in your agreement of purchase and sale. After that, it should be smooth sailing!
Have questions about what’s happening in the Toronto condo market? Call or text to learn more: 416-500-5360 / Email: info@rashidnotash.com
