In this write-up, we will discuss everything involved in placing an offer to purchase a Real Estate property, the various elements of an offer and the outcomes that can happen in a Real Estate negotiation.
You pass through steps to research and find properties which meet your family goals and investment aspirations, and finally, you find one and are ready to place an offer to purchase. At this point, your broker would prepare an Agreement of Purchase and Sale. The Buyer would generally initiate this document and send it to Sellers and their broker.
To completely understand the Agreement of Purchase and Sale (APS) let us take a deep dive into various elements of an offer,
The agreement should clearly identify the Real Estate property and the buyers and the date on which the offer was written
Details on the Purchase price and the initial deposit amount - The initial deposit amount could be herewith, which means that the Buyer is submitting the initial deposit draft along with the offer. Or it could be 'Upon Acceptance, ' which means that the Buyer would submit the deposit to the listing brokerage within 24 hrs of acceptance of the offer. There is no set amount of deposit that one can submit with an offer. However, in the Greater Toronto Area, it is generally 5% of the purchase price. This is also called a good faith deposit and shows the buyers' sincerity in the offer.

Contingencies (Conditions) - There could be several contingencies which you can build into your offer. The most common ones are for Finance and Inspection. The general convention is for 5 business days after the offer acceptance date. The condition of finance is to ensure the buyers have enough time to work with their bank/financial institution on their formal mortgage approval against the property. The bank might go for a 3rd party appraisal, allowing all of that to be taken care of. Especially in the saturated and dynamic markets, as it is now in the end of 2022, it is imperative to have a financial condition in the offer.
The condition of inspection gives the added safety net as a buyer to get the property inspection by a qualified inspector. For example, if the condition has been placed for 5 business days, the Buyer has 5 days to coordinate the inspection. Based on the feedback of the review, if there is anything material concerning the property, the offer can again be brought back to the negotiation table. Based on the agreement between Seller and Buyer, this re-negotiation might end up in Sellers agreeing to take care of the inspection feedback items or they can agree on a rebate in the originally agreed purchase price.

Inclusions/Exclusions - The agreement should clearly specify all of the chattels included in the purchase and any exclusion of any fixtures the Seller might want to take along with them. The underlying convention of Real Estate offers is that the fixtures are always part of the purchase, and chattels don't come with the purchase. For this reason, the Chattels like Fridge, Stove, Dishwasher, Washer & Dryer etc, need to be mentioned explicitly in the offer.

 The completion date or closing date is an essential part of the offer and should be a business day, the day when the Buyer will receive a clear and free title to the property and in exchange, the Seller will receive the dues agreed in the APS.

Irrevocability - Any offer which is made to the Seller cannot be indefinite, it always will have something called irrevocability. The convention in GTA Real Estate is to have offer a 24-hour irrevocable, to provide enough time for the Sellers to act on the buyer's offer. In an inclining or seller-oriented market when there is an established offer date, the irrevocability in multiple offers scenario is provided till midnight, the idea is that the Sellers would be able to decide from the offers on the table and pick the one which suits them best.

Offer Registration - This is the first step when your broker places an offer for a property to the listing brokerage, there is a form 801 which is provided by OREA and we utilize it to convey that we have a signed offer in regards to a property. This offer registration form doesn't have any material aspects of the offer, like purchase price, deposit amount, conditions, completion date etc. It just has the information about who the Buyer is, when the offer is sent, what time it is valid and the brokerage's details.
Offer Presentation - This is the time when the main offer documents are shared/presented to the sellers/seller's agent. It could happen in person as well as remotely too. It is always advisable to share some background information about yourself as a buyer and your financial qualification to purchase. This gives confidence to the Sellers to accept your offer. Real negotiation in Real Estate is when both buyers and sellers feel that they are getting the value out of their sale and buy.
Contingency Period - or we also call it a conditional period. If your offer has conditions say, for example, finance for 5 business days and inspection for 5 days as well. You now have the window to provide your bank or mortgage advisor with the accepted agreement copy along with your supporting documents. And they can initiate a formal approval at the financial institution to get your mortgage approved. Something banks would hire 3rd party appraisers to appraise the property, as they want to ensure that you didn't overpay for the property.
In parallel, you have the inspection condition where you hire a licensed home inspector and at a mutually agreeable time with the Sellers. This is an opportunity to get the in-depth inspection done for all elements of the property, including but not limited to the foundation, electrical, plumbing, drains, appliances, roof shingles, a/c, furnace, attic etc.
Once you as a buyer are satisfied with the financial eligibility and you are alright with your inspection results. The next step is to provide fulfillment to the Sellers. This is a document declaring that you have completed your obligations for the conditions in your initial offer and now have fulfilled those. By virtue of fulfillment, your offer now becomes a firm agreement, which is legal and binding on both sides. 

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate and we will do our best to help.


Mudit Mehta
Broker of Record
ELIXIR REAL ESTATE INC.
Off: 416-816-6001 | [email protected]