YOU want the best possible terms and the SELLERS want to get the best price they can. To some extent, you are adversaries. The difference between a stalemate and a fair compromise may depend on whether you have planned ahead and developed a strategy for success.
Study the cards
To determine if the asking price reflects fair market value, have your REALTOR® research the sale price of comparable homes. If you think the house is realistically priced, don't make your first offer too low. Even though you need room to bargain, remember that the Seller will probably have strong emotional ties to the house; a low offer may be considered an insult and negatively impact your future negotiations. Knowing the market is key.
Your REALTOR® can also answer questions about market conditions, comparable prices and sales in previous years and other context information related to this property and/or the general area.
When you decide the time is right, your REALTOR® will assist you in preparing an Offer to Purchase on a standardized form required by law. The Offer to Purchase must give the names and addresses of both Buyers and Sellers, a street address and legal description of the property for sale and a date of possession. It also sets out the price, terms and conditions, amount of deposit, list of goods included in the sale price and a time and date by which the offer must be accepted.
The offer is signed by you, witnessed and, sometimes, accompanied by a cash or cheque deposit. There is no predetermined amount for your deposit - its a negotiable item.
A deposit made by cheque should be payable to the Listing Broker (the company marketing the home) for deposit into the Broker's trust account. If the deposit is cash, a receipt will be provided by the Selling Agent. The deposit money will go into his or her company's trust account and be transferred to the Listing Broker's trust account if your offer is accepted.
Deposits are held in trust until the deal closes and then applied to the purchase price. If your offer isn't accepted, or if you can't meet any of the conditions (included in an accepted offer, your deposit will be returned.
If you are providing a substantial deposit, the money could be placed in an "interest-bearing" trust account to earn interest until the transfer of title. The interest can be paid to either the Buyer (you) or the Seller - this should be negotiated and specified in the Offer to Purchase.
Your REALTOR® who is legally required to present your offer to the Seller and, once that has been done, there is nothing to do but wait while the Seller considers your offer.
The Seller has three choices: to reject your offer, to accept your offer outright, or to counter-offer. To be valid, a Seller's acceptance has to be made within the time specified on the offer. When an offer is accepted - whether immediately or after one or more counter-offers - it becomes a legal contract binding on both parties to the transaction.
Although you hope your offer is immediately accepted, the Seller could come back with a counter-offer. Whatever the answer, it will be quickly relayed from the Seller through the Listing Agent to your REALTOR® and on to you.
The Counter Offer
A counter-offer shows the Seller is interested in reaching a deal but wants to adjust certain items in your offer that weren't acceptable. Usually negotiations simply consist of an offer, a counter-offer and agreement, but more than one counter-offer could be involved. Negotiation takes patience, knowledge and some give and take.
Usually, the key areas for negotiation are price, possession date, terms and conditions and possessions other than the home itself. The back-and-forth interplay of these items will determine where you and the Seller are likely to compromise.
For example, if you stand firm on your purchase price, you might have to take earlier possession to clinch the deal. Or the Sellers might want a little more money than you first offered but may be willing to give you something they weren't going to include at first.
Usually negotiations are minimal. But, if you are involved in more protracted negotiations, always be open and honest about your wants and needs. Frustration or finalization depends on whether both parties show a real desire to reach agreement through openness, good faith and honesty
Play it safe
The Offer to Purchase outlines items normally included in the purchase price of a home. It also has space for extra items that may not normally be included and for items to be specifically excluded.
Items which normally stay with the home - things like light fixtures, cabinets, built-in shelves - are considered fixtures. If there are specific fixtures you want to specifically ensure are included in the purchase price it would be prudent to note them on the offer so that there is no question about it.
Items which are not attached to the property and are movable are called chattels. Examples would be the wood pile, certain appliances, decorative mirrors, fireplace tools, and so on. If there are chattels you want to be included in the deal, ensure your REALTOR® puts them in the offer.
There are sometimes fine lines between what things are considered fixtures and chattels. For example, the built-in system of hoses and outlets for a central vacuum system is considered a fixture, while the canister and accessories are generally considered chattels. Play it safe and clearly spell out exactly what you expect to be on the property and/or in the house on the day you take possession.
The following items are some of the most common items which should be itemized in an offer:
- central vacuum system
- storage shed
- swing set
- water purifier
- propane tank
- pool accessories
- wood burning stove
- garage door opener
- alarm system
- ceiling fans
- window coverings
- fireplace screen, tools, woodpile
It is essential that the Offer to Purchase clearly states which items stay with the home and which ones the Sellers take with them. Never take anything for granted.
You may want to make your offer subject to one or several conditions. Failure to satisfy conditions doesn't affect an agreement's validity but does give a Buyer the right to sue for damages in the event there is a breach of the contract.
A conditional offer may be countered with a special clause or condition called a "time clause". This is used occasionally used by Sellers to enable them to accept a Buyer's conditional offer and still leave room for them to accept another offer if one comes along. It provides for the Seller to give notice to the prospective Buyer that another acceptable offer has been made and the original Buyer now has a specific number of hours - often 48 hours (Sundays and holidays not included) - to satisfy all conditions in the original offer or to withdraw them.
You will be busy between the Seller's acceptance of your offer and time at which you actually take possession of the property. For most people, arranging financing is a number-one priority. You should also consult a legal professional and provide copies of all required documents to ensure all the conditions of the contract can be met on time.
Don't forget you will need to alert the phone company, utilities, post office and other services of disconnection dates and get installation and connection dates for your new home. You will also have to send the required change of address notices for your driver's license, credit cards, banks, newspapers and others. Tell your friends and relatives about your new address and phone number. Confirm a convenient moving time with the Sellers and make your moving arrangements well in advance.
The transaction isn't complete until you have title to the property transferred into your name. Registering title and mortgage documents at the Land Titles Office requires legal documentation and the payment of legal fees. Your legal professional will do a title search of the property to confirm that the property is registered in the name of theSeller and to see if there are any outstanding caveats, liens or encumbrances registered against the title.
All steps necessary to complete the legalities of the transaction will be done by the legal professional on your behalf, including obtaining a site certificate, zoning memorandum, tax certificate and information from utility companies. Your legal professional will also make arrangements for collecting money due on closing of the deal, prepare documents for your signature and forward funds in trust to the Seller's legal professional for possession and transfer of title clear of all encumbrances.
The transfer of keys will usually be done through the legal professionals office with a variety of trust conditions in place for the exchange of keys and money.
Head for home
Now that you have made all the right moves to close the deal - you gathered market information, were flexible during negotiations and planned ahead - pop the cork on that champagne bottle and toast your new home!
I am the GUY that will make a difference!
I specialize in selling homes in the in the Okanagan Valley including Westbank, West Kelowna, Peachland with a focus on Rose Valley, Lakeview Heights, West Kelowna Estates and Shannon Lake.
Karen Guy, REALTOR®
Coldwell Banker Horizon Realty
C 250.878.3605 O 250.768.8001