The day has arrived!! You have signed the documents, packed your boxes, received your money and turned over your keys.
Your home is sold!
While it is the normal practice for the buyer’s lawyer or notary to prepare the documents necessary to transfer the legal ownership, it is recommended that you, as the seller, engage legal counsel to act solely on your behalf. Among other things, he or she will protect your interests by:
The Contract of Purchase and Sale, which you signed, will state the completion day for the transaction. On that day, legal ownership will transfer from you to the new owner in exchange for the purchase price of the home.
If it is possible, as some suggest, for people to quickly become very wealthy by dealing in real estate, then, unfortunately, people on the opposite side of the same transaction may, just as quickly, lose some of what they have invested. Those who may stand to lose are sellers who agree to be a party to buyers’ financing arrangements in which the sellers assume risks.
Essentially, there is nothing wrong with most innovative or creative financing if all parties are fully aware of the potential risks and fully understand the possible consequences of such risks. However, the fact is that many owners (sellers) are not aware of the potential disasters which may occur.
It is strongly recommended that you secure competent advice from a real estate licensee or legal counsel before finalizing any real estate contract. This recommendation is much more urgent when the offer you are considering includes terms which could jeopardize you financially.
Be wary of offers which require any of the following:
An offer to purchase will contain information about how the buyer intends to finance his or her purchase.
If you currently have a mortgage loan on your home, you may be faced with one of two situations:
The Buyer Wants to Pay Cash and Has no Mortgage
This situation will require you to pay out your existing mortgage and there may be an interest penalty for doing this. Remember that having to pay an interest penalty effectively reduces the price you will be receiving for your home.
The Buyer Offers to Assume, or Take Over, Your Remaining Mortgage Loan
In this situation, before agreeing to allow the buyer to assume your mortgage loan, you should ensure that your mortgage lender will release you from any future obligation to repay the monies owing (if the buyer defaults).
Contact the financial institution which holds your mortgage to obtain information about your position in each of the above situations. It is a good idea to do this well in advance of signing a Listing Agreement so you will be able to give your licensee accurate information.
Financing by the Seller
If you have no existing mortgage, an offer to pay all cash is ideal and, of course, would be your preference.
But the buyer’s offer might state that part of the purchase price is to be paid in cash and part is to be paid in payments over a specified period of time at a specified interest rate. In effect, the buyer would be asking you to become the lender.
If you are considering an offer containing a request for “seller financing” (sometimes referred to as a seller take-back mortgage), you should first seek legal advice in order that you fully understand the implications of this type of financing arrangement.
The purpose of a subject clause contained in an offer to purchase is to set out a specific condition that must be fulfilled before the sale can go through.
One common subject clause you might encounter is one in which the buyers make the sale conditional upon their finding the exact amount and type of financing which will enable them to purchase your home.
Another common clause is one in which the buyers make the purchase conditional upon a satisfactory home inspection.
Remember that, if you accept an offer which contains a subject clause, you are effectively taking your home off the market for the period in which the buyers are attempting to meet the condition they have set. Therefore, you should ensure that an agreed upon time for the condition to be met is specified in the offer to purchase.
If one of the conditions contained in a subject clause cannot be met after every reasonable effort has been made to do so, the contract ends and there is no legal obligation to complete the purchase or sale.
As a seller, you may wish to accept an offer containing a subject clause (e.g. subject to the buyers selling their own home) yet still leave yourself free to consider other offers, just in case the buyers are unable to remove the condition. You can do this by having the buyer agree to inserting a time clause in the contract. A time clause will permit you to require the buyer to remove all subject conditions within a short, specified time period if you receive another offer that you would like to accept. If the buyer does not remove the conditions within that time, the conditional contract comes to an end and you are free to accept the second offer.
When selling a strata property, a common clause you might encounter is one in which the buyer makes the counter-offer conditional upon his or her review and approval of all pertinent strata documentation, such as registered bylaws, current rules, strata meeting minutes, financial statements, strata plan, Form B, engineer’s reports, etc.
Accept an Offer Exactly as it Stands
If you decide that you would like to accept an offer, be sure you know the precise meaning of each term in the written offer before you sign the document.
Once you, the seller, sign a Contract of Purchase and Sale agreeing to its terms, and your acceptance has been conveyed to the buyer, it becomes a legally binding contract.
Legally binding means both you and the buyer will be bound by the terms of the contract and must perform your respective obligations as stated. Your performance can be enforced in a court of law.
If you are uncertain about any of the clauses contained in the offer, you may wish to consult a lawyer before signing the contract; however, keep the expiry date of the offer in mind if you decide to postpone acceptance!
Make a Counter-Offer
If you change anything at all in the original offer, you are considered to have rejected that offer and to be making a new offer from you to the buyer. This new offer is usually referred to as a “counter-offer.”
The risk in making a counter-offer is that if the buyer has changed his or her mind and rejects the counter-offer, you do not have the option to return to the original offer and accept it.
But, the buyer may decide to make another counter-offer back to you and the process of counter-offers could continue until an agreement is reached.
If, after making a written counter-offer, you decide you don’t want to sell the home, it may be possible to revoke the counteroffer. Many legal problems can result from the revocation of a counter-offer, so you should seek professional advice about the correct procedure to follow.
Reject the Offer
You are under no obligation to accept any offer or to make a counter-offer. If, however, you reject an offer that exactly meets all the terms you agreed to in the Listing Contract, which you signed with your listing brokerage, you could be legally obligated to pay the commission.
Ignore the Offer
You are under no obligation to acknowledge receipt of any offer. If, however, you ignore an offer that exactly meets all the terms you agreed to in the Listing Contract, which you signed with your listing brokerage, you could be legally obligated to pay the commission.
All offers to purchase your home will contain a number of important details which you must consider.
The offer should include:
Once an interested buyer has been found, a written offer to purchase your home will be prepared. This offer is usually recorded on a standard form entitled Contract of Purchase and Sale.
Your licensee will explain to you the process of receiving and reviewing offers. Do not be surprised if you are presented with offers which differ dramatically from your listed asking price; your licensee is under an obligation to bring all written offers to you for your consideration. If several offers are brought to you at once, you are under no obligation to accept any one offer over another.
Sellers must disclose known material latent defects about their property to a buyer. A material latent defect means a defect that cannot be discerned through a reasonable inspection of the property, including a defect that renders the real estate:
Material latent defects may also include:
Common examples of material latent defects could include the fact that the basement leaks when it rains, structural damage to the property, failure of the building’s envelope (water ingress), underground storage tanks located on the property, problems with the potability/quantity of drinking water and any un-remediated damage caused by the illegal use of the property, e.g. marijuana grow operation.
New installations or renovations of electrical or gas systems completed without appropriate permits and inspections may also be considered examples of material latent defects. For information on what type of work in a home requires gas and electric permits, please contact the BC Safety Authority at 1-866-566-7233 or visit www.safetyauthority.ca.
Failure to disclose material latent defects could result in future problems, including legal issues if the new owner discovers problems that you were aware of and did not disclose.