Real Estate Talk:
Promise to purchase first!

Insist on price and terms prior to due diligence

By Joseph Marovitch

Updated November 22, 2023

How often in the process of selling a property do potential buyers ask for documents such as the electrical or oil invoice, receipts for the roof, and several other documents before providing a conditional promise to purchase. This is extremely annoying for the seller if there is not an agreement on price and terms in advance.

The word conditional means the offer will not succeed unless the conditions in the offer are satisfied. Therefore, there is no risk of being committed to purchase. If the conditions are not satisfied, there is the option to renegotiate or cancel the offer.

Most issues are supposed to be declared in the seller’s declaration, which saves time and reduces renegotiation, however, sometimes in the inspection or examination of documents, issues are found that may reduce the value of the property. Still, providing an offer with conditions is better than raising the hopes of the seller only to let them down. The following explains why.

Sellers are anxious to sell despite what they may say otherwise they would not place the property on the market. So, when a prospective buyer asks questions about the house during a visit, sellers get excited. After the visit, when a buyer asks for invoices, the seller gets more excited. As prospective buyers ask for more and more due diligence before an offer, sellers get so excited they can hardly wait for the amazing offer.

It is far better to know if buyer and seller are in the same ballpark before the seller exerts effort, only to find out they are not even on the same playing field.

Then the offer arrives far below the asking price or the prospective buyer does not make an offer at all.

These are some of the most discouraging moments in real estate for the seller and for the broker since the seller may lose faith in the process. Therefore, when a prospective buyer asks for items, it is better to tell that buyer to place the requests in a written promise to purchase as conditions.

It is far better to know if buyer and seller are in the same ballpark for price before the seller exerts effort, only to find out they are not even on the same playing field.

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Next article: The perils of overpricing

STATE OF THE MARKET

Canada Prime Rate today: 7.2%
Canada Inflation today: 3.8 %

As many homeowners are approaching their mortgage term renewal dates with trepidation of excessive interest rate increases, the Federal government implemented a new charter of rules offering supposed relief. Measures implemented by Finance Minister Chrystia Freeland under the Canadian Mortgage Charter state lenders must contact homeowners 4 to 6 months prior to the end of their mortgage term and inform them of their renewal options, such as:

• Be able to make lump sum payments.
• Have the option to sell their principal residence without prepayment penalties.
• Have the option to temporarily extend their amortization period and have any fees and costs waived for doing so.
• Not have interest charged on interest if the homeowner is in a period of negative amortization, meaning paying interest only and not principal.

While some of these measures may temporarily assist homeowners, many economists feel these measures will only defer payments and prolong the crisis of increased carrying costs and mortgage payments.

‘Purchase property at the market price, never higher, and make sure it is easily sellable. You will live longer and happier.’

If a homeowner does not have a mortgage and can afford the carrying cost, don’t sell at this time. If purchasing and the buyer has the income to pay all the costs, purchase what can be afforded. It will not cause undue financial stress and can be easily sold.

If a property causes excessive financial stress, either sell it or do not buy it in the first place. Always do what can be afforded. We may not realize this, but life is short. Life goes by so quickly, and only when we are older do we realize how much we do not have to care about. Purchase property at the market price, never higher, and make sure it is easily sellable. You will live longer and happier.

Have a great week!

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