Chapter 8

Buying Your Home: Offer, Negotiate and Close

Once you find a home you love, you’ll want to make an offer. It’s an exciting and emotional time, during which most first-time home buyers rely heavily on the experience and expertise of their real estate agent.

The comprehensive market analysis

Market Analysis

How much should you offer to pay for the home you want?

The question seems simple enough, but the answer can be very complicated. The list price you see on MLS or other real estate advertisements does not always reflect the true, fair or reasonable market value of the home. Sometimes sellers list their homes for significantly less than they expect to get, hoping to lure multiple buyers, trigger a bidding war, and drive up the selling price. Sometimes sellers list their homes for significantly more than they can realistically expect to get, believing the home to be worth more because they’ve invested a lot of money or have emotional attachments to the home.

This is where your real estate agent comes in. At TorontoProperty.ca, our agents will provide objective information and guidance that is hard to find anywhere else. They will conduct a comprehensive market analysis to help determine how much the property is really worth.

When conducting a market analysis, agents typically contact Toronto’s Municipal Property Assessment Corporation (MPAC) to see what the city has assessed the home at. They’ll also look at all the most recent sales in the same neighbourhood and similar properties elsewhere in the city, along with active and expired listings. Then they’ll pick up to five homes that are most comparable to the one you want to buy. These comparables, known in the industry as “comps,” will give you and your agent a clearer idea of what your desired home is truly worth.

Your agent will review the comps and make an educated recommendation as to what you should offer for the property you’re interested in.

Preparation and explanation of the offer

Preparation and Explanation of the Offer

Once you’ve agreed on a price, your agent will be responsible for preparing a formal document called the Agreement of Purchase and Sale, usually referred to as the “offer.”

The offer may include conditions. For example, you may want to make the offer conditional upon inspection, or conditional upon your ability to secure financing. In Toronto’s competitive real estate market, successful buyers typically attach very few conditions to their offer. Many forgo an independent inspection and rely instead on an inspection report provided by the sellers. Many buyers attach a deposit cheque to the offer, along with proof that the lender has pre-approved a mortgage.

Regardless of your conditions and requirements, your agent should walk you through the offer step-by-step, and patiently explain the details. Be sure to ask questions; this is a legally binding document and there can be serious consequences for failing to follow through. When you’re satisfied, you’ll sign the offer to purchase and your agent will forward it to the selling agent.

Negotiation and acceptance of the offer

Negotiation and Acceptance of the Offer

Sometimes, the buyer will immediately accept your offer and you’ll move quickly to the next phase of the buying process.

In other cases, the seller may reject your offer without any explanation. This is rare, but it does happen, and your agent will endeavour to find out why. More commonly, the buyer will countersign the offer, which means they’ll change the terms of the offer and send it back to you usually with a higher price and fewer conditions.

In Toronto’s real estate market, bidding wars are common. Your real estate agent will help you navigate this process, which can be very emotional. In a bidding war, you may want to talk to your agent about adopting the following tactics:

  • Submit an offer with a certified deposit and mortgage pre-approval attached; this tells the seller that you’re serious about buying.
  • Limit or remove your conditions; many buyers forgo inspections, for example, or accommodate the seller in other ways, say, by being flexible on the closing date.
  • Write a handwritten letter to the seller. Tell them how much you love the house. Include a picture of your kids and your dog. No, we’re not kidding it works!

Negotiations will continue until both the buyer and the seller are satisfied that they’ve reached the best deal possible, or until you and your agent have concluded that you won’t be able to come to an agreement and it’s time to walk away.

Ideally, you’ll complete the process with a signed agreement to purchase. If you didn’t include the deposit cheque with your offer, you’ll have 24 hours to send it to the seller. The purchase won’t be complete until the conditions are all fulfilled. This mean that, while you’re fulfilling your conditions, the sellers can continue to show the house and may receive additional offers. If this happens, you may choose to waive conditions or take other steps to firm up the deal: Your agent will walk you through your options.

Notices of fulfillment and waivers

Notices of Fulfillment and Waivers

Once the offer is signed and the deposit cheque is delivered, you’ll be responsible for meeting all of the conditions. For a first-time home buyer, this typically means you’ll have to secure financing from your lender. You may also have to arrange a home inspection. If you’re buying a condominium, you’ll have to get a copy of the status certificate and send it to your lawyer for review. There are countless conditions that can be attached to an offer to purchase; every sale is unique. Your TorontoProperty.ca agent will help you every step of the way.

When you complete each condition, your agent will file a Notice of Fulfillment to show you’ve upheld your end of the bargain, and the seller will do the same. In cases where you’ve decided not to take advantage of a condition for example, you decide you don’t want a home inspection, after all — your agent will file a waiver.

Closing day

closing_day

At long last, closing day will arrive. On closing day, the seller receives the money from the sale, and you finally get the keys to your new home. Several important things happen on closing day.

You will visit your lawyer to sign a host of documents, including (but not exclusive to) the title registry and the financial documents. The lawyer will show you the statement of adjustments and you’ll write a cheque to cover the remaining closing costs. For a detailed list of closing costs, see Chapter 3.

Your lawyer will transfer the money to the seller’s lawyer, usually by courier. In return, the seller’s lawyer will send over the keys, along with the legal documents that transfer ownership of the home to you. Your lawyer will review these legal documents, register the title and the mortgage with the Land Titles Office, secure title insurance and finally pay the registration fees and land transfer taxes. If you’re buying a condo, the lawyer will also have to review the status certificate to clear that condition. For a detailed list of the lawyer’s responsibilities, see Chapter 2.

You will usually get the keys to your home in the afternoon on closing day, so planning to move in on closing day can be risky. If you must, plan to have the movers arrive late in the day, or into the evening, to avoid any problems.

Congratulations! You’re now the proud owner of your first home.

A note on language

Under the Ontario Real Estate Business Broker’s Act, an agency relationship exists between yourself and the real estate company of your choice, otherwise known as the brokerage. The individual you choose to represent your interests in the purchase of your first home could be either a broker or sales representative acting on behalf of the brokerage they are registered with. For the purposes of this guide, we’re going to refer to these people as real estate agents, because that’s the term most people use. But remember: Legally, your agent is the brokerage, not the person.