THE IMPORTANCE OF THE PURCHASE OFFER

IN COLLABORATION WITH JIMMY ARSENEAULT, RE/MAX BROKER.

THE IMPORTANCE OF THE PURCHASE OFFER

The real estate market is in turmoil. It is not uncommon in 2021 for a selling homeowner to receive five, ten purchase offers for a property listed on the market. Should the potential buyer, therefore, give up on restrictive clauses to remain competitive?

Every legally constituted business or organization has its own legal existence. Its destiny is generally determined by its directors, who may or may not be shareholders. Shareholders invest funds in exchange for an ‘ownership’ percentage of the company; the directors convened in a board, make management decisions for the company and may delegate certain decisions to committees or executives. Although shareholders are allowed to act in their own interests, the same does not apply to directors, who must always ensure the best interests of the company or organization.

One might think that in real estate, the purchase offer is a bit like an engagement: a commitment to proceed formally if both parties keep their word. However, the difference is that a purchase offer is a legal document that can be enforced if either party refuses to fulfill their commitments after acceptance.

The Far West?

The current real estate market is unprecedented. Re/Max broker in Gatineau, Jimmy Arseneault, knows this well: “Just five years ago, it was challenging to sell without the help of a broker. Today, anyone can sell without an agent, and that’s precisely the danger because, without the guidance of a professional, the potential for conflict is greater.”

He cites an example of a seller who accepts a first purchase offer and then accepts a higher second one a few days later. “The seller exposes themselves to a lawsuit because they won’t be able to deliver on one of the two offers,” he says.

Usually, the purchase offer is valid for about ten days, allowing for the fulfillment of conditions. “But financial institutions struggle to meet demand, and obtaining financing confirmation can sometimes take more than 15 days. The preference today is for the buyer to obtain prequalification,” explains Mr. Arseneault. That said, “the time stipulated in the purchase offer for the fulfillment of conditions may not be decisive unless the parties have expressly provided for it or the delay results from a lack of diligence on the part benefiting from it,” adds Me Dani Ann Robichaud.

The Offer to Purchase

Whether it’s a commercial or residential building, the purchase offer will essentially contain the conditions of the sale. A building inspection is usually part of it. The seller, in commercial matters, who wants to dispose of a building might be tempted to avoid conducting an inspection before putting it on the market. However, lawyer Me Robichaud points out that ‘he remains responsible for any latent defect existing at the time of the sale, whether known to him or not.’

On the other hand, Jimmy Arseneault emphasizes that the buyer must be realistic and diligent: ‘If the septic field or French drain is working but is 20 or 30 years old, it is unrealistic to expect another 10 years from it. The price will take into account the remaining life expectancy of the facilities.’

Other clauses and ancillary documents:

While property visits are more challenging during a pandemic, they are still possible, and it is the buyer’s responsibility to visit the property to avoid unpleasant surprises. The buyer is, in fact, obligated to accept the property on the date of their last visit.

Although the buyer is required to act diligently, the seller still has the duty to inform them of any condition that could affect their purchasing decision. The broker must also diligently check the property’s history. ‘For example, if there has been a suicide or cannabis cultivation on the premises, it must be disclosed. The same goes for a past recourse to an exterminator,’ says the broker.

The seller’s disclosure must present the current state of the premises; if it is a few months old, it is advisable to review it. Does the location certificate provide an accurate picture of the building and its accessories? The broker is obligated to ensure the accuracy of the information contained.

When possession dates become an issue, what about pre-possession agreements in favor of the buyer? Since this is an unusual situation covering the period between the acceptance of the purchase offer and the signing at the notary, specific clauses and terms must always be provided.

WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.