Real Estate Talk:
Promise to purchase first!
Insist on price and terms prior to due diligence
By Joseph Marovitch
Updated April 12, 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 house 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.
Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.
Next article: The perils of overpricing
STATE OF THE MARKET
CPI today (inflation rate) 5.25%
Bank of Canada interest rate 4.5%
The news today is good and bad and good again, depending on if you are a buyer or a seller. The good news is the Bank of Canada has re-committed to leaving the interest rate at 4.5%, which was already stated a month ago. What occurs after January depends on the inflation rate. The Bank of Canada is shooting for a 2% inflation rate which is currently 5.2%. The factors determining the inflation rate are numerous and international.
‘If buyers are searching for a reasonably priced cottage, now is the time. As a note, a decline in demand for a second residence is a sign the real estate market is normalizing. We need a balanced market for real estate to thrive.’
The bad news is sales declined to a new low by 28% according to the Quebec Real Estate Association of Realtors. This is an effect of inflation and high interest rates which cause property values to drop and carrying costs to increase. This has caused buyers and sellers, who are not in a rush, to wait until the economy is more favorable. However, there are signs the market will improve in the future. Prices have declined to a normal level, which means that with lower inflation and interest rates to come, and without further disturbances in world politics, we could see an increase in demand and values in a flourishing market.
The good news for buyers is rates and inflation are now affecting the country home industry, which was on fire a few months ago. During the pandemic, when everyone wanted to move away from crowded cities, demand was very high while supply was very low. A shack would sell for 50% or more above its prior value with few or no conditions. Now we are seeing values decline, if not correct. If buyers are searching for a reasonably priced cottage, now is the time. As a note, a decline in demand for a second residence is a sign the real estate market is normalizing. We need a balanced market for real estate to thrive.
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Joseph Marovitch has worked in the service industry for over 30 years. His first career was working with families from Westmount and surrounding areas, hosting children between the ages of 6 to 16 as the owner and director of Camp Maromac, a sports and arts sleep away summer camp established in 1968. Using the same strengths caring for the families, such as reliability, integrity, honesty and a deep sense of protecting the interests of those he is responsible for, Joseph applies this to his present real estate broker career. Should you have questions please feel free to contact Joseph Marovitch at 514 825-8771, or email@example.com