Real Estate Talk:
The necessity of deadlines
How important are they in a promise to purchase?
By Joseph Marovitch
We are as good as our word, none the less, better to have it in writing. Whether a buyer purchases a house, condo, income property, business or anything else, the seller wants to know when their property is sold. Therefore, contracts for property are specific. In a brokerage contract to purchase, there are conditions that must be satisfied before the property can be transferred to the new owner at the notary. The process of satisfying these conditions is called due diligence.
Some of these conditions may include but are not limited to:
- A condition of 1st visit
The seller wants to know the buyer’s offer is within the price range of what they are selling, therefore the buyer will provide a 1st visit only if they find the offer acceptable.
- Review of leases and/or expenses of the property
The buyer will want to know the condition of the property. Will the buyer need to repair the property and invest money?
- Finance condition
The buyer may have to apply for a loan to buy the property or the buyer may be paying cash, in which case, the buyer must provide proof of cash sufficient for the price of the property.
- Other miscellaneous conditions the buyer may require.
Without deadliness for each of these conditions, the due diligence can last forever. During the due diligence process, the seller cannot accept other offers. Therefore, each condition has a stated period of time in which the buyer must provide a written response stating they are not satisfied, or not.
Each condition is timed in terms of cost. A first visit costs nothing, therefore the 1st visit occurs soonest. The second condition, review of expenses cost time and therefore occurs second. The third condition, inspection, does cost money and therefore occurs third. The finance condition takes the most time and therefore occurs last, except in the case of paying cash. If paying cash, the finance condition can occur within days of an accepted promise to purchase.
In a brokerage contract to purchase, there are conditions that must be satisfied before the property can be transferred to the new owner at the notary. The process of satisfying these conditions is called due diligence.
If the offer is accepted, each condition is an obligation of the buyer to fulfil within the given time periods. The next part of this article is key.
If the condition does not occur within the given time period, the condition is deemed satisfied. If the condition occurs but the buyer does not provide a written response by the stated deadline to provide a written response, the condition is deemed satisfied. Therefore, if the buyer does nothing, then the condition is satisfied. Once all conditions are satisfied, the property is legally sold. This means that even before money has changed hands at the notary, the property is sold.
There is another side to deadlines in favour of the seller. If there is a condition of the buyer providing a deposit, or proof of cash, or proof of financing and the buyer does not, the buyer will be in default of the promise to purchase. It would then be at the discretion of the seller as whether to proceed or cancel the offer.
‘If the offer is accepted, each condition is an obligation of the buyer to fulfil within the given time periods.’
What happens if the buyer does not show at the notary after all conditions are satisfied is another article, or contact me via the comments section at the bottom of the page.
Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, go to the search link and type in Joseph Marovitch.
Have a great week!
Next article: What happens if all conditions are satisfied and the buyer decides not to buy or the seller decides not to sell?
State of the market
Once again headlines indicate that prices in Montreal are rising and will continue to rise for the foreseeable future. The Canadian Mortgage and Housing Corporation (CMHC) states that, on average, a property, meaning single home, will be worth about $86,000 more two years from today. The reasons stated for the rise are an ever-increasing demand by foreign and national buyers while there is a decrease of property for sale. Sellers are not keen to pay more for their next property, but they are enthusiastic about seeing their current property rise in value.
There are many reasons for price rising in Montreal. The job market is rising, more people are working, interest rates have been low so more people are borrowing, the market has been relatively stable the last few years therefore attracting foreign investment and, Montreal is running out of space to build which is a factor that protects the real estate market price from ever dropping too low. Interest rates will rise, causing some backlash and slower gains but the island will bounce back. Buying real estate today is a marvellous investment for the future, in Montreal.
Image: CCO – Public Domain
Read also: Other articles by Joseph Marovitch
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 to, 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 firstname.lastname@example.org