You've found a home you’d like to buy, now what? You make an offer and that offer, which at the end of the process if successful, will result in a Contract of Purchase and Sale. In this article we discuss the basics of the CPS and how to maneuver through the negotiation process.
As a prospective buyer, you hold the reins when it comes to making an offer on a property. Once you've found a house that ticks all the right boxes, it's time to take the next step and write your offer.
The CPS is the pivotal legal document (the template is drafted by The Canadian Bar Association and the B.C. Real Estate Association) that outlines all the terms and conditions of your offer. It serves as the formal agreement between you(the buyer) and the seller. Although the CPS template is standard, and is 10+ pages of legal jargon, it is customizable by both seller and buyer in its terms and conditions.What are Subject To clauses? Also known as Conditions, Subject To clauses state you will go through with the purchase only if a specific event occurs. Subject To clauses provide essential safeguards for buyers and they can be about really anything that’s important to you. However, they must be reasonable and with no ambiguity. These clauses are time-sensitive and must be dealt with within a specific period, all stated and agreed upon in the CPS. Common clauses include inspection, ensuring you are able to secure financing and successfully obtaining insurance on the property.
When things happen is super important to both parties. You may be in the process of selling your current property and need to receive your funds, you may be preparing to send your kids to their new school. Whatever scheduling demands you have, the party on the selling side will also have similar demands so getting to a consensus requires some work.
Signatures play a crucial role in making the CPS legally binding. Both parties involved, the buyer and the seller, must sign any amendments or changes to the contract. This ensures that the agreed-upon terms and conditions are understood by both parties; the most important thing about the CPS is that it be enforceable in a court of law.
Determining the right offer price depends partly on the prevailing real estate market conditions. In a seller's market characterized by limited supply and high demand, competitive offers close to, at or even over the asking price may be necessary. In contrast, in a buyer's market with ample inventory and lower demand, you may have more room for negotiation. You have control of just more than the price in order to strengthen your offer; dates, terms and conditions can be negotiated to benefit either party.
If you see a property that you are interested in but feel it’s overpriced, don't just write it off, make an offer! You may not get that offer accepted as is but it starts the conversation with the seller. Offers under asking price will be taken more seriously if they’re in writing (a CPS) and if you wait to see what happens, it could get snapped up before you can act. You might just end up with a very sweet deal!
In highly competitive markets, you may find yourself in a potential bidding war with other buyers. It's important to work closely with your realtor discussing your expectations, their judgement of the situation and stay within your budget. You won't know how much your competitors are offering so don't assume they are all going to be miles over the asking price, all negotiations have to start somewhere. If the seller counters your offer beyond your comfort level, you have the option to gracefully step away; you are under no obligation to go higher.
We hope you enjoyed this blog! Sometimes the home buying and selling process can seem confusing, complex and opaque. We aim to shed some light on the process so you can feel confident in your home buying journey. And if you have a question, ask away.
Steve & Selena
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