Tuesday, May 24, 2011

What Does An Offer to Purchase and Sale of Real Estate Mean in Simple English? Part 2

(Part 2)

What Does An Offer to Purchase and Sale of Real Estate Mean in Simple English? 

Remember the last time you sat down with your Realtor to write an offer on your dream home? You were so excited that you did not really pay much attention to the Realtor as he/she reviewed the details of your offer? You know what you offered to pay for the property and when you plan on taking possession but your eyes probably glazed over when your agent started reviewing all the legal jargon. Does this sound familiar? You said “uh-huh” and “Yes, I understand all of that perfectly.” The truth is you probably did understand everything at the time but then you got home and you thought. “So what did I really sign?”

Here is the answer to that question! This is a breakdown of the complete Contract of Purchase and Sale in layman terms.  Now you can sit back and read what you signed up for when you were working with your agent.

Paraphrasing the Contract of Purchase and Sale:
We are going to pretend that we are still together while you read this, fair enough? I also am going to pick some arbitrary numbers and facts to put into this offer for the purpose of this explanation.

The language.... “Mr. and Mrs. Buyer, what we are doing is making an offer of $450,000 including a deposit of $10,000. You will pay $10,000 within 24 hours of removal of all subject to conditions.”  This means that once you have removed all your conditions, including conditions about financing and home inspections, you will give us $10,000 as a deposit on the property.

Clause #2
explains that we (the real estate company) will be taking your deposit monies and holding that money as a stakeholder. This means that the money is no longer yours and it is not the seller’s either. We are holding it “in trust” for both parties. If the deal is to go ahead, that money will become part of your purchase price.
If the deal does not go through and you do not remove the conditions, that money goes back to you as long as the seller signs off on it. There is very rarely a problem with that, but should the seller have a problem they could hold up the return of the funds. Do you understand this?

Clause #3 describes
erms and Conditions.  We write in “See attached  addendum #__ on pages __ to __” because there is usually not enough space there.

Clauses #4, #5, #6
outlines the dates. 
Completion is the date that the title of the property actually transfers into your name. As you can see, the completion date is one day before the possession and the adjustment date. The reason for that is that Land Titles is in Kamloops and it takes an extra day to do the completion.
Possession date is the date that you actually receive your keys and can move into the property.
Adjustment date is the date the lawyers calculate that all of the taxes, levies, and any fees associated with the property due up to and including the adjustment date.  Usually, 12:00 noon on the adjustment date is when you will actually start paying for any utilities or taxes and everything that’s involved with the ownership of the house.

Clause #7 (The Included Items:)The Included Items are basically the things you want included in the purchase of the house but are not nailed down or directly attached to the property. This includes things like the fridge and the stove, the washer and dryer, pool cues and the pool table, the built-in vacuum and all attachments. It is sometimes appropriate at this stage to put in things that actually are fixtures like the built-in dishwasher just to make it absolutely clear that they cannot be taken away.

Some sellers, when they’re not informed properly by their realtors, think that if it’s not in the contract they can take it whether it’s attached or not...then you get a nasty surprise on move in day.

Clause #8 is pretty self-explanatory: The property and all included items will be in substantially the same condition at the possession date as when previously viewed by the buyer on (insert date you saw the home).

Clause #9 and #14 are for the Seller. They mean that the Seller is going to give you title, free and clear from any writs or covenants or liens or caveats, or charges against the title. By signing this document, the Sellers are authorizing their lawyer to pay out anything that’s against their title and so that they can give you a clear title.

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