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The Offer to Purchase Form

2004-12-17T13:13:00.000-08:00

Understanding the Offer to Purchase Form is essential once your house hunting expedition is a success! You have found the perfect home, one that satisfies your needs, most of your wants... and best of all, fits your pocketbook. Now comes one of the most important phases of your home-buying experience: making an offer to purchase the home.

Basically, the offer is a precisely worded document that sets out the terms and conditions between the buyer and the seller. Once the offer is made and accepted, and after any conditions/contingencies of the offer are me, the offer becomes a legally binding contract-meaning that the buyer and the seller are obligated under law to hold up to your ends of the agreement and complete the transaction. For that reason, you must be very sure you understand what's in your offer before you sign it.

A properly drafted offer should leave no room for interpretation. It should contain everything that is important to you about the home and the transaction. For example, if the MLS listing states that the washer and dryer are included in the sale, put that fact into the offer. How about that satellite dish in the backyard? If you want to be sure it's sold with the house, say so in your offer. Having a written agreement about these things now will avoid complications later.

Preparing the offer:
If this is the first time you've purchased a home, you probably have never seen an Offer to Purchase Form before, let alone a drafted one. Not to worry. The Realtor® is knowledgeable about this subject and will prepare your offer taking into account all the factors that are important to you. Fortunately, Realtors® don't have to reinvent the wheel every time there's an offer to be drafted. Standard Offer to Purchase forms are used by almost ALL Real Estate Boards. The wording on these forms has been thoroughly reviewed and tested through the legal system, and is broadly accepted.

That doesn't mean, however, that your specific offer cannot also include special conditions you want. Every sale/purchase is different, and your offer will contain the wording that suits your needs.

Let us look closer at some of the specific areas in the Offer the Purchase agreement that will be custom tailored to fit your specific needs.

Purchaser/Buyer: That's you (unless you are selling the home). If you're buying the property with a spouse or other partner, each of your names should be listed exactly as you will want them to appear on the ownership document (deed) when the property is yours.

Vendor/Seller: That's the seller. If jointly owned, each seller's name should be listed in full, exactly as shown on the existing ownership document.

Real Property: This is the exact legal description of the property you intend to purchase. It should include the postal address, lot and plan number, as well as frontage and depth dimensions. The Realtor® and lawyer/attorney (some areas it is the title office or escrow officer) will make sure the property description is specific and accurate. This is most important.

Purchase Price: The price you are offering for the property.

Deposit (Earnest Monies): When you submit an offer to purchase, normally you are requested to include a deposit to demonstrate a serious intent to buy the property. This deposit will usually be in the form of a cheque (check), payable to the listing broker, who will place it in a trust account until the sale is completed or terminated. Your deposit provides the seller with some assurances that you will go through with the sale when the day of completion arrives.

NOTE: the deposit is not the same thing as the down payment. However, when an agreement is reached and the transaction is competed. The deposit will be credited in full towards the purchase price. There is no standard amount for a deposit, but the size of your deposit says something about how serious you are about buying the home.

Clauses particular to the agreement: As we mentioned earlier, every transaction is unique, so space has been provided (sometimes on a separate document) for any provisions that apply specifically to your offer. Sometimes there provisions are stated in the form of "conditions/contingencies" to the agreement. Conditions/contingencies are generally inserted at your request and for your protection. If a condition is not satisfied with the time allowed, your offer is not longer valid.

Often times, for example, the buyer will want to insert a condition/contingency in the offer to purchase that is subject to the buyer arranging a specific amount of money required for financing. Conditions must always be satisfied by a specific date or within a certain time. An unconditional offer that is signed by the buyer and accepted by the seller becomes a contract binding by both parties. However, if the seller accepts an offer containing one or more conditions, the contract is subject to those conditions. When the conditions are satisfied or "waived" (relinquished), the transaction becomes firm.

Keep in mind that if the seller receives two offers at or near the same purchase price, and one contains conditions/contingencies with the other does NOT, the seller may well be inclined to accept the Unconditional offer. Your Realtor® or Lawyer/Attorney can counsel you on the use of the wording of conditional clauses.

Chattels included and Fixtures excluded: In order to attract buyers, it is common for sellers to include in the selling price some chattels that are not normally considered part of the dwelling itself. These are MOVABLE pieces of personal property. Some examples are fridges, stoves, washer, dryer, microwave ovens and these chattels are listed as items to be included with the sale.

Fixtures are permanent improvements to a property that normally stay with the property as part of the sale. However, it isn't always clear what constitutes a fixture or whether it will stay. For example, the seller will naturally want to retain a dining-room chandelier that is a family heirloom. Since the chandelier could be defined as a fixture, it SHOULD be listed as an exception in the offer. From a legal standpoint, if it is a fixture and not mentioned in the agreement as an exclusion, it is then considered part of the purchase price.

If there is any doubt in your mind as to whether chattels are fixtures and part of the agreement, specifically list the items you are concerned about in writing in your offer. Where appropriate, give make and model numbers, or describe the items by colour and location. Leave nothing to chance. You will avoid surprises later, when you take possession of the home.

Irrevocability of the offer: This is the period during which you leave the offer open for consideration by the seller/buyer. If you are not notified before the precise time and date specified that your offer had been accepted, the offer becomes "null and void" (no longer valid). The Realtor® can assist you in determining how long you should let the seller think about your offer, but it is often a period of less than 48 hours.

Completion Date: This date, often referred to as the "closing date" is the glorious day when the parties expect to complete the transaction. All documentation is filed, all monies are paid out - and the property is yours. Closing dates are often scheduled for 30-60 days from the date of the agreement (and some as long as 90 days unless it is a new home and this date could be substantially longer), although this period will vary with circumstances. Your Realtor® can help to negotiate a mutually acceptable closing date.

Time to examine title: When buying a home, you are really paying for ownership rights that go along with it. The "title" is the legal evidence of ownership, and you want to be sure your lawyer/attorney/title/ or escrow officer has time to search the seller's title to make sure it is free of restrictions. If the seller's doesn't have title to clear ownership, there may be complications in transferring title to you on the closing date. Give your lawyer/attorney/title/ or escrow officer as much time as possible to search title prior to completing the transaction. Also speak to your Realtor® lawyer/attorney/title/ or escrow officer about Title Insurance.

Involve Your Lawyer/Attorney: You may want to have your lawyer review the offer before you sign and submit it to the seller. Why? Because when it's all said and done, you and the seller are legally responsible for what the offer says.

If you believe you will miss an opportunity to buy a home because you have to wait for your lawyer to review the offer, there is a simple solution. Ask your Realtor® to insert a satisfactory review by lawyer, usually within a period of 24 hours is appropriate. Most lawyers are very responsive to your request and almost all use fax email communication, so they can look at the offer right away. Do NOT expect your lawyer to comment of the VALUE on the property. His/her job is to review the document and ensure your rights are protected.

This article is written by Roger Warren and may not be copied or reproduced in part or whole with out the express written permission of the author.

Author: Roger Warren. Sutton Group Elite Rlty Inc
rowarren@trebnet.com
www.bankpowerofsalescanada.com

Dated 1/August 2004

Live in Canada

2004-12-16T09:24:00.000-08:00

SELLING A HOME CAPITAL GAINS TAX

The Income Tax Act does not specifically set out whether or not a gain or loss is capital in nature. The taxpayer is responsible for reporting the gain as income or capital gain. This report may then be challenged by the Canada Customs and Revenue Agency with the onus of proof on the taxpayer.

Over the years, Capital Gain Tax has been determined based on a number of factors such as the intention of the taxpayer, relationship to the taxpayer's business, frequency of transactions, length of time held, nature of the transaction and objects of the corporation. Should a debate proceed to the Tax Court of Canada, the Court will consider relevant factors concerning taxpayer conduct before, during, and after the period under appeal. Certain factors carry more weight in the process.

Consider these Capital Gain Tax facts:

What was the taxpayer's intention at the time the property was purchased?
When a property is purchased for investment, any resale profit could still be considered taxable as ordinary income, if the apparent intent was to resell for a profit at a future time. The Tax Court will consider such things as reasons for the sale, compelling necessity, change in circumstance and external factors.

Relationship to the Taxpayer's Business:
The Tax Court will undoubtedly classify profits as taxable under ordinary business income when a taxpayer uses expertise acquired in regular business activity to generate a profit on the purchase/sale of similar or related commodities. The court also looks at the time and attention the taxpayer spent on the transaction. Real Estate transactions of contractors, renovators, brokers, (agents) salespeople, and appraisers have typically fallen under close scrutiny.

Frequency of Transactions:
Revenue Canada will assess how often the taxpayer engages in the sale of capital property. Usually, frequency of such occurrences suggests the carrying on of a business for profit. Assessment as ordinary business income will be the result. However, even an isolated transaction can be so judged, given the right set of circumstances.

Nature of Transaction and Assets:
Taxability as income may be indicated if the asset cannot normally be used either personally or for investments purposes. Mortgages are often judged under this test. If the mortgages are purchased at substantial discounts or have a short maturity date, the mortgagee may be viewed as being in a business that realizes profit from the transaction, thus invoking business income as opposed to capital gain.

Objects of the Corporation:
The Tax Court will look at the articles of incorporation to determine if a transaction falls under the objects of the corporation, and if it is part of usual business. However, the absence of this provision may not be deemed conclusive by the Court. Proving that a specific sale fell beyond the normal course of affairs of the company is difficult and once again the burden of proof rests with the taxpayer.

SPECIAL NOTE
Real Estate Transactions:
Profits would likely be taxed as regular business income if a taxpayer buys and sells real estate on a regular basis. However, if the taxpayer can prove that these dispositions were a planned and necessary part of a total investment program, then there may be a case for capital gains treatment of the profit. In the case of farmlands, if the taxpayer purchased or inherited the land and lived on it for a period of time, a disposition of the property will most likely be regarded as a capital gain.

Further, if a sale of real estate is not planned, that is brokers are not employed, the property is not advertised, no sign or other visible evidence of active marketing is present, then the profit may be, but NOT always treated as a capital gain. In some cases the profit from an eventual sale of the property might be deemed as a capital gain where the taxpayer purchased real estate for a third party to whom her/she expected to transfer it without profit, and was then left with the property when the third party backed out of the transaction.

Exemptions:
Exemptions to the payment of capital gains have varied throughout the past decades. A capital gain exemption for individuals (not corporations) can apply to certain sales of real property. The Federal Budget (February 1992) dramatically affected the exemptions by eliminating it for almost all property; however, capital gains accruing prior to March 1992 on qualifying small business corporation shares may still be eligible for the exemptions. Such issues go beyond the scope of the article and expert advice should be obtained.

The major exemption for real estate practitioners to consider involves a principal residence. A principal residence is defined as a house, apartment in a duplex, apartment building or condominium, cottage, houseboat, trailer or mobile home, or a share in a co-operative housing corporation.

To qualify as a principal residence certain criteria must be met:

- The taxpayer must own the housing unit, either jointly or solely.
- A family unit may only have one principal residence.
- The land upon which the housing unit sits cannot exceed one acre and any excess is not considered part of the principal residence unless the taxpayer can prove it is necessary for personal use and enjoyment.
- The unit must be ordinarily inhabited in the year by the taxpayer or by his/her spouse or common-law partner, former spouse or common-law partner, or child.
- The unit must be designated as the taxpayer's principal residence for the year.

Appropriate expert advice from a Chartered Accountant should be sought in regard to capital Gains issues and exemptions.

This article is written by Roger Warren and may not be copied or reproduced in part or whole with out the express written permission of the author.

Author: Roger Warren. Sales/rep

Sutton Group Elite Rlty Inc

rowarren@trebnet.com

www.bankpowerofsalescanada.com

globeandmail.com - Canada's best source for news continuously updated from The Globe and Mail

2004-12-16T09:18:00.000-08:00

globeandmail.com - Canada's best source for news continuously updated from The Globe and Mail

2004-12-15T16:52:00.000-08:00

globeandmail.com - Canada's best source for news continuously updated from The Globe and Mail

2004-12-15T16:25:00.000-08:00

globeandmail.com - Canada's best source for news continuously updated from The Globe and Mail

Real Estate in Canada

2004-12-15T14:15:00.000-08:00

Buying New

Buying a new home should be a breeze but there can be a few pitfalls and some might cost you big. Some are apparent but some are not. As with anything it is buyer beware. If you the buyer are better informed you are not only aware but forewarned. There are many things to take into consideration. For instance the layout - I’m not talking about just the inside but the outside too (Plan of Subdivision) your location. How is your property site in relation to other properties? Will it be overshadowed by bigger properties? Who wants to have their drapes pulled all the time?, You would like to sit in your own backyard without being looked on all the time. Your privacy must be worth something. How about major roads, railways, hydro wires, industrial parks even that open piece of land could be a high rise condo not a great green space as you thought. Anything that could have a negative effect on your property has to be taken in to consideration. After all, why is Joe up the road getting more when he sells his house than you, you did pay the same price right. Maybe Joe did his research and took his real estate agent along with him, and then they did there own checking such as going to the correct authorities and looking over documentation that showed a main highway coming through where you bought or that there was going to be an industrial park just outside your window, and maybe that’s why Joe did not buy the home you are in now. On the builders plan it shows the house being 2000 sq. ft. - what do you do if you find out it’s smaller, not many buyers run round with a tape measure before it closes, so where does that leave you the buyer. Not all builders’ plans are correct I know because when you resell I have to verify to protect you that these are correct. I don’t want to be sued I’m sure you don’t either. Also, for those families that have children, the builders plan may say there are schools to be built, but don’t hold your breath they may or not. Remember when buying a new home, you will not know what you have or what you get, until it is complete, not just your home but also everything else that goes with it.

In many contracts that a builder has you sign, which tend be more in the builder’s favor then yours, since the builder’s lawyer has probably drawn them up. Simple things such as the fact that the builder may have the right to change or substitute another building material at the builder’s discretion. What are the closing costs? Don’t they have to tell you - not all builders use the services of licensed real estate people in their showrooms, where in due course the licensed real estate person would have to (by law), disclose and have you sign a Buyers Agency Agreement to that effect. Which protects you the consumer, that you have received full disclosure on who is working for who. And you have been advised on such costs. What about GST? Is it included or is it extra? The same could be said for Land Transfer Tax, also hydro hook-up and OHBW (Ontario Home Builders Warranty) What are the costs if any? Are there set fees for these things or are they being also set at builder’s discretion. Will the home be completed on time - what if the builder does not complete and I have sold may home? Does the builder even have to complete and how does that effect my deposit? What about a building inspection - can I use my own inspector or does the builder hold sway over that too? Is the builder affiliated, do they belong to a builders association, what was the builder’s last project, and where? These questions and more can sometimes not even be apparent and a little overwhelming to you. As with any contract, you should, before you sign, or at least have a condition in the contract, for a second opinion. Your lawyer is probably more aware of these questions and conditions and will be able to guide you through them. Also he or she will be able to advise you what some of the closing cost will be, because some of costs have set guidelines.

You may not have a real estate lawyer, should you require one please email me at rowarren@trebnet.com and I will so furnish you. Remember a Real Estate Lawyer is some one who does Real Estate Law for living, not Family Law, Or Copy Write Law, Etc. I’m here to also help you in that regard, use my services and myself. Your real estate experience should be a pleasant one, you have a doctor, a lawyer, a mechanic, why not a registered and licensed Real Estate Professional.

This article is written by Roger Warren and may not be copied or reproduced in part or whole with out the express written permission of the author.

Author: Roger Warren. Sales/rep
Sutton Group Elite Rlty Inc
rowarren@trebnet.com
www.bankpowerofsalescanada.com