Real Estate Talk:
Promise to purchase
Buyer and seller must adhere to the terms and deadline in an offer to purchase a property
By Joseph Marovitch
July 27, 2023
In the promise to purchase, which is a legally binding document used in purchasing a residential property, there are usually conditions prior to signing at the notary. The usual conditions are:
- Examination of documents such as the deed of sale, certificate of location, municipal tax, school tax, annual expenses such as electricity, gas, maintenance invoices, prior inspection reports, invoiced for upgrades such as roof, windows, balconies ……. etc.
- Inspection of the property to check the structure, plumbing, electricity, roof, and anything else which is attached to and part of the structure.
- Financing either with a financial institution or with all cash
There may be other conditions depending on what type of property is being purchased. There are further conditions if the property is a lakefront, mountain, duplex, divided condo, undivided condo, farm, ranch, or other type.
Whatever conditions there may be in a promise to purchase, each condition will have a description, the number of days to fulfill the condition, and a deadline to complete the condition. These terms in the conditions are extremely important and the buyer and seller must be aware of these conditions and deadlines.
If there are conditions in an accepted promise to purchase, the buyer is legally obligated to fulfill these conditions. If they do not follow through on an examination of documents or an inspection the buyer cannot provide written notice that they are not satisfied, therefore as the deadline passes, the condition becomes a satisfied condition.
If the buyer fulfills the condition but provides no written notice that they are not satisfied by the deadline, the condition is deemed to be satisfied.
The same is true for financing. If a buyer states in an offer that they will attempt to obtain a mortgage loan from a financial institution within 10 days of the accepted promise to purchase, for 5 years at 5.5% amortized over 25 years, the buyer must provide a letter of acceptance or refusal from their financial institution. If the buyer does not provide a letter of either acceptance or approval, the seller can force them to go to a financial institution of the seller’s choice. If the buyer refuses, the buyer can be liable in court. However, more often than not, the seller will not pursue a buyer who cannot prove they have the assets to purchase the property unless the buyer provides a pre-approval with the offer.
In the end, when all conditions are satisfied, intentionally or not, the buyer has legally purchased the property. Deadlines provide an out. If the deadlines are not adhered to, the buyer has purchased the property.
After all the conditions are satisfied, and the buyer decides not to appear at the notary for signing, the buyer will receive a legal notice to show up at the notary at a specific date and time. If the buyer does not appear at the specific date and time, the property can be relisted back on the market. If the buyer receives and accepts an offer that is less than the previous buyer’s offer, the previous buyer who did not show at the notary, may be forced by a judge to pay the balance of the offer amount that was agreed to prior, with the default buyer. If the seller accepted an offer that is more than the previous buyer offered, then there would be no damages and in most cases, the issue would end there.
It is not difficult to stay out of trouble if you read all the documents and emails and adhere to the written and agreed-upon conditions, terms, and deadlines.
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 issue: Preparation to move prior to signing at the notary
State of the market
Bank Of Canada Rate today: 5%
Canada Inflation today: 2.8%
Despite interest rate hikes, real estate prices continue to rise. As the economy strengthens due to pent-up demand, demand for property is growing stronger. Consumers have funds and are making large ticket purchases. During the month of July and August, the market tends to slow down, yet this year appears to be an exception. There is an audience of buyers and demand for property. Inventory is not high, but buyers are out and looking.
As the consumer price index appears to be remaining at 2,8%, this is a very strong indication that interest rates will drop. With lower interest rates and lower inflation property value will increase. Finally, some good news. Now, all we just need are more affordable rental units.
Should you have questions or comments please feel free to contact me via westmountmag.ca or look me up on LinkedIn. As well, to view past articles, click here.
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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 firstname.lastname@example.org