In Toronto, we usually encounter three different types of offers:
- “Normal” offers where the Buyer and Seller have the opportunity to negotiate;
- Multiple offers or bidding wars, where multiple Buyers are making offers on a house at the same time
- Bully offers, where a Buyer attempts to circumvent a bidding war by making a preemptive offer.
In Part 1 of this 3-part series, we’re going to look at “Normal” offers.
Hooray! You’re getting an offer! Here’s what to expect:
The Buyer’s offer may be presented to you and your agent in person, your agent might receive it by e-mail or, in a throwback to the 90’s, the offer may arrive by fax.
If the offer occurs in person:
- The Buyer’s agent will present the offer either at your house or your agent’s office; the Buyer won’t be present
- Your agent will ask the other agent some clarification questions
- Do your best not to react to the offer; you won’t be expected to talk or answer any questions
- You’ll discuss the offer with your agent in private
The offer (also known as an Agreement of Purchase and Sale) will contain some important points of negotiation:
- The deposit (higher is better; we’ll be aiming for at least 5% of the purchase price)
- The price (obviously higher is better!)
- The closing date (the date where ownership changes and the Buyer takes possession)
- The irrevocable time/date (how long the offer is valid for before it expires)
- The conditions (We regularly see financing conditions, home inspections and/or conditions that allow for the Buyer’s lawyer to review the offer or the status certificate (for condos). It’s not typical in Toronto to receive offers that are conditional on the Buyer’s property selling.
- Inclusions/exclusions (appliances, light fixtures, window coverings, big screen TV’s, etc.)
Once you receive an offer, you can respond in one of 3 ways:
- Accept the offer as is – Congratulations, you’ve just sold your home!
- Make a counter-offer by signing back their original offer; you can increase the price, change the conditions, change the closing date, inclusions, exclusions or deposit. The Buyer then can accept, decline or make another counter-offer.
- Decline the offer and walk away.
Important: real estate offers in Ontario are only valid if they are put in writing, so even if the agents agree to something on text, via phone or email, until the agreement is signed, it isn’t binding on either party.
Important to know: Time plays a critical role in real estate negotiations. The irrevocable time – the time at which the offer expires – is important. A Buyer is committed to their offer until their irrevocable time, for example, 11 PM. At 11:01 pm the offer expires and they can walk away. Similarly, if you make a counter-offer to the Buyer valid until 10 AM, you can’t entertain another offer at 9 AM (even if that offer is higher) – you’re bound to your counter-offer and the Buyer is free to accept it at the price and conditions you signed, until 10 AM.
Most important: You control the price, conditions and deposit you choose to accept. While your agent will make recommendations based on their knowledge and experience, you are always in control and shouldn’t feel pressured to accept something you don’t want.
In part 2 of this series, we’ll be looking at what to expect, as a Seller, if you get a bidding war.