Navigating the Offer and Contract Process

MAKING AN OFFER

Your real estate agent will prepare an Offer Sheet with all of the details of the offer: financing, desired closing date, contingencies, inclusions, etc. You must review and sign before offer can be submitted. Along with the offer, a pre-approval or proof of funds (if applicable) must be submitted.

Once you sign the offer document, it is sent by your agent to the listing agent for the property and he/she will present the offer to the seller. Within a day or so, a response will be sent and could be any of the following: 1.) accepted as presented 2.) a counter offer 3.) a rejection of the offer. Your offer is not binding and you can decide to withdraw your offer at any point up until you sign the contract. Also, your offer is not binding and seller can decide to accept another better offer at any point until contracts are signed.

The accepted offer is the most desirable first response but does not happen often! The counter offer will allow you to revisit what you are willing to pay and possibly present a counter offer in return. And the rejection could mean that your offer was too low or they have already accepted someone else’s offer. If you really want the property, it is good to keep the negotiations alive until you achieve an accepted offer.

It is important to remember that offers can be made by other parties on properties all the way through to the closing date, by law, but the deal usually becomes binding when both parties have signed the contract and the buyer has put down a deposit. A listing agent is required to present all offers so working quickly on due diligence is of utmost importance once you have an accepted offer but aren’t yet in contract.

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ACCEPTED OFFER

The first thing the buyer does after getting an accepted offer is hire a home inspector to thoroughly inspect the home (inside and out), to uncover any issues, any appliances that are not working, any heating system problems, etc. A satisfactory home inspection is always a contingency and before any contracts are drawn up, the buyer will decide whether or not to move forward based on the findings of the inspection. It is best to get the inspection done within the first week of receiving an accepted offer. The seller will still be showing the home for back-up offers and if you wait too long you run the risk of someone “besting” your offer, an accepted offer is not binding.

When the details of the offer have been worked out and accepted by both the buyer and the seller, a Memorandum of Agreement is written up by the listing agent with everyone’s contact information and it is sent to the lawyers for both parties. Ideally you should work with a lawyer familiar to the area you are buying, can’t stress this enough, but if you have someone you trust to handle your real estate transaction, that is fine, too.

CONTRACT

If the buyer decides to proceed with the purchase, the seller’s lawyer will send a draft of the contract to the buyer’s lawyer and discussions will occur back and forth between you and your lawyer, between the seller and their lawyer and between the two lawyers. Once all the details have been worked out and agreed to, you will sign the contract. It will be forwarded to the seller for signature. The contract is now fully executed, all parties have signed

While the contract is being worked on, you should contact the bank (if there is a mortgage) and provide them with the details of the purchase. Once they receive the signed contract, they can begin the process which includes having an appraiser come to the property.