HOW DO YOU BUY A HOME?
Once I have helped you find a great home in which you can really see yourself living, it’s time to make an offer. Deciding what dollar amount to put on that piece of paper is one of the hardest decisions to make – offer too little and you may to lose the house (particularly in a seller’s market), the Seller may choose not to deal with you, or it may make negotiations difficult and emotionally draining. On the other hand, nobody wants to pay more for something than it’s worth.
Through the combination solid research and my experience, I will help you determine what the market value is by showing you the prices of comparable houses nearby. I will also weigh such factors as the condition of the house, and what kind of competition you might face. I will give you a range of what price to offer the Seller, a price which gives you the best chance of getting the deal done without paying too much. If you end up in a multiple offer situation, we will discuss various strategies that will get you the home you want without overpaying. Once we’ve decided on the price you’re prepared to offer, and any conditions that may need to go in the offer, I will draft this legal document and go over all the details with you.
It does happen that even dream homes end up being over-priced. If we end up in a situation where the right home for you is listed at significantly more than market value, we will have to discuss the pros and cons of a low ball offer. The danger is that you will offend the Seller and they could prefer to give the house to almost anyone else, even if you deliver a slightly higher offer later. But if you are willing to be patient and you recognize that the negotiations could potentially be tough and draining, sometimes going after an over-priced home can mean extra value for you, as these properties often end up selling below market value when they do sell.
Once the Seller has looked at your offer, they can choose to accept it, reject it, or sign it back (make a counter-offer). If they sign it back, for instance, if you have offered $250,000 for a house listed at $259,000 and they return it with a new price written in at $257,500, or they make other changes to your conditions, there will be an irrevocable date time on the offer: the date by which you must counter-offer or the deal will be null and void. You may have as long as a day or two, or as short as a few hours, so once we get into negotiations, you will want to keep yourself available to discuss counter-offers. Together we’ll look at the sign back, keeping your goals uppermost in mind while I do the tough work of negotiating with the Seller’s agent to advocate for your best interests to secure the best possible deal for you.
Offers can be firm or conditional. A firm offer is usually considered to be stronger than a conditional one because it’s ‘a bird in the hand’ for most Sellers. Sometimes, you can even buy the house for less money if the Seller knows the deal is not going to fall apart because of financing or because of something found in the home inspection. It means you’re prepared to buy the home as-is with no conditions. You can put yourself in a position to make an unconditional offer by securing financing and doing a home inspection before ever putting in an offer. A conditional offer means you have placed one or more conditions on the purchase (financing, inspection, the sale of your current home, etc.), meaning that the home is not actually sold until all the conditions are satisfied or waived.
When I draft the legal purchase documents, there are five main elements to keep in mind:
Price – The goal here is to balance two objectives: actually buying the home and buying it for the best price possible. In the vast majority of instances, the best price will be market value, as determined by careful research of recent sales and competing active listings. Sometimes you will be able to secure the deal for less than market value. Sometimes, in order to purchase a unique property that is in high demand, the Buyer will end up paying a little more than what has been considered “market value”. When we sit down to talk about what price to offer, we will weigh all the research data with the state of the market and come up with the best offer price for your situation.
Deposit – shows your good faith and will be applied against the purchase of the home when the sale closes. For an average home here in London, a $1,000 deposit is often sufficient. As the value of the home rises, so too should the amount of your deposit. The deposit is a show of good faith, that you are serious about closing the deal.
Conditions — Standard conditions can make the completion of the deal subject to a home inspection, to you obtaining financing, or to you selling your existing property. A condition can be anything however. Sellers obviously don’t like to have their homes effectively ‘off the market’ while they wait for conditions to firm up, so the shorter the conditional period (usually 5 business days) the better chance the Seller will accept your conditional offer.
Inclusions and Exclusions – Your offer may be contingent on including certain items in the sale, such as appliances, fixtures, and decorative items.
Closing Date – The Seller will often specify the date or date range they’d like to close on the property and the closer you are to that date, the better your offer will look to the Seller. Sometimes being flexible on the closing date, can give you leverage when it comes to negotiating the price. The closing date is the day the title of the property is legally transferred to you and the funds go to the Seller.
There is one other situation that you see most often in a very active Seller’s Market: multiple offers (where a single property has more than one offer come at the same time). Though they are less common now that we’ve entered a more Balanced Market, they can still occur, especially if the property is a desirable home in a great location and it is well priced, that is, priced close to market value. Sometime in this situation a “holdback” date is often used by the Sellers to build a buzz around the property while giving their property time to be seen by lots of buyers: the MLS listing will say ‘no offers until xxx date.’ I’ll let you know when this date is and ask you the all-important question: keeping your ideal scenario and all your other options in mind, is this really your ideal home? If the answer is YES, then it’s essential to be ready to submit a competitive offer that you are comfortable with and will leave you with no regrets. We will balance the potential of losing the home of your dreams by only a couple thousand dollars or less (pennies a week in the context of a mortgage) with not overpaying and leaving you trapped in a home you paid too much for, waiting for market value to catch up to the price you paid.
What other things can you do to prepare to win out in a multiple offer situation? Most Sellers would rather accept a firm deal over one that has conditions. So definitely make sure your financing is in place with a pre-approval from a competent lender before submitting your offer. Other deciding factors, all things being equal in purchase price, include a larger deposit and a closing date that matches the Sellers’ needs. Another thing I’ve found very helpful is to appeal to the Sellers’ emotions by telling them about you and your family, your plans and goals for the property, and highlight the positive aspects of your offer.
If the Seller gets several offers all within a close range, the Seller’s representative may instruct the various buyers to go back and improve their offers, so you might have a second or even a third chance to offer more money; but more often than not you do not get this chance, so in these situations it’s important to go in with your best offer first!
SERVICE | KNOWLEDGE | RESULTS
Thinking about Buying?
Should I Buy Now?
Getting Ready to Buy
Choosing the Right Agent for You
Why Choose Steve?
Searching the Listings
Choosing a Neighbourhoods
How Do You Buy a Home?
The Documents You Will Sign
The Deal is Firm: Now What?
Your Lawyer’s Role
Closing Costs & Other Fees
Preparing to Move
After Closing Day
334 Wellington Rd. S
London, Ontario N6C 4P6