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Home Offer Must-Haves

An article from Herald Homes

What do I always say? Be prepared. Well, actually, I tell you to make lists. But part of making a list is the preparation, and it is key to the ‘must haves’ you need when making an offer to buy a property. The most important aspect you need to consider when writing an offer to buy a new home is the conditional clauses your real estate agent will put in the contract to protect you, the potential new homeowner.

There are three conditional clauses which appear most often in a purchase and sale contract — a finance clause, an inspection clause, and if you already own a home which isn’t sold, a sale of purchaser’s property (SOPP) clause.

Subject to/conditional upon financing

Before you even begin the new home search, you should make an appointment with your banker. Find out how much money you can spend on a new property by getting pre-approved for a mortgage. The bank will review your debt-to-income ratio (among other things) to determine how much money they are willing to lend you. And let’s be clear, a pre-approval for a mortgage loan does not mean the bank will automatically give you that amount — it all depends on the value of the property you plan to buy.

This is why the finance clause is so important in a purchase and sale contract. The bank needs to verify that the property you want to purchase is worth the amount of your pre-approval or they won’t give you any money. So unless you are buying your new home in cash, make sure you have this clause in your contract.

Subject to Inspection

I think we can all agree Mike Holmes is an expert on housing construction. He is known as Canada’s Most Trusted Contractor and when buying a new property even HE insists on a property inspection. You should too. They are vital when purchasing a new place to call home. Without a property inspection, you may not discover the crack in the foundation or the mould in the attic. Additionally, your real estate agent will want to negotiate the cost of these repairs off the final sale price because once you buy the property, those become YOUR problems and it is up to you to pay to have them fixed.

Sale of Purchaser’s Property (SOPP)

This is really about peace of mind and practicality. For most of us, selling our current home gives us the ability to afford our next property purchase. If you have not already sold your current home and want to buy a new property, your agent will include an SOPP clause in your offer which gives you, the buyer, a set amount of time to get your home sold and complete the new purchase. If you can’t sell your current home within the specified time limit then the purchase and sale contract on the new home contract becomes null and void so you don’t end up on the hook for two properties.

In hot property markets, having clauses can be viewed negatively by an owner looking for a quick sale, but they are vital in protecting buyer’s interests. After all, if you can’t sell your existing home, you can hardly move. If the home you’re moving to is worth less than you’re offering, or will require thousands of dollars of repairs just to be liveable, it’s not a good investment. And if you don’t have a mortgage, you’re going nowhere, sunshine.

I have only given you some of the more common clauses here, but there are many more which can be written into a purchase contract that I didn’t touch on. Your real estate professional will be able to discuss the clauses needed for your specific real estate transaction.

You shouldn’t go skydiving without a parachute; in real estate, your parachute is your clauses, so don’t buy a property without them. Be prepared.