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What is an Agreement of Purchase and Sale?

 

An agreement of purchase and sale is a common document that is used to purchase a real estate property in Ontario. While, there may be different formats depending on if it’s a new built or an existing property, the information stated are relatively the same. If, you’re a first-time home buyer and need guidance. Here, are some things you should pay attention to.

 

 

What is an agreement of purchase and sale?

 

This, is a written contract between the seller and the buyer for the purchase of a particular property. The agreement ensures the buyer will purchase this property for the price mentioned and can occupy the property on the date stated. However, before the closing date the buyer will have to satisfy certain terms and conditions.

 

Process

 

1.       Purchaser makes an offer (irrevocable for a certain time period)

2.       Counter –offers

3.       Accepted by the seller (becomes legally binding)

4.       Satisfy the terms and conditions

5.       Closing

 

The agreement can only be canceled if both the seller and the buyer agree. Since, this is a written agreement, it can be legally enforceable. The Ontario Real Estate Association (OREA) has guidelines you can follow and templates that you can adjust according to the seller and the buyer’s requirements.

 

2 Types of Agreement of Purchase and Sale:

 

1.       OREA Agreement of Purchase and Sale

2.       Pre-Construction Agreement of Purchase and Sale

 

Why do I Need One?

You need an agreement of purchase and sale in Ontario to purchase real estate. You will need a fully executed agreement when you arrange for your mortgage.

 

Terms & Conditions

Listed below are some common terms and conditions that are stated in a purchase and sale agreement. 

 

a.       Mortgage financing arranged within a specified timeline

b.      Inspection of the property

c.       Sale of the purchaser’s current property

d.      The buyer agrees to pay the balance of the purchase price, subject to adjustments, by electronic transfer, bankdraft or certified cheque to the seller on the completion of this transaction

e.      The parties consent to electronic signatures

f.        Provide 72 hour notice to the buyer if the seller finds another written offer that is acceptable

g.       Chattels & fixtures are included/excluded in the purchase price

h.      Buyer has the right to view the property a certain number of times

i.         The Seller agrees to deliver the property to the buyer free and clear of any personal property not included in this Agreement of Purchase and Sale and in good condition

 

What is a Chattel?

Chattels are movable personal items, contained on the property. Some examples include:

 

1.       Furniture

2.       Electronics

3.       Gardening equipment

4.       Personal belongings

 

What is a Fixture?

A fixture are improvements done to the property that cannot be easily removed. The fixtures are included in the purchase of the property if the agreement does not exclude them. Some examples include:

 

1.       Curtains

2.       Appliances

3.       Hot water heaters

4.       Light fixtures

5.       Alarm systems

6.       Other

 

It is important to list down what is included and excluded in the property. Because if it is not stated the buyer has the agreement of purchase and sale stating their claim to obtain those items/ fixtures.  

 

 

Pre-Construction Agreement of Purchase and Sale:

The builder agreement of purchase and sale state’s the same information, just in a more complicated format. This, agreement is more detailed because it is prepared by the builder’s lawyer, it’s their way of securing the investment.

 

What you should look out for?

 

1.       Names are spelled correctly

2.       Verify the description of the model

3.       All attachments and schedules included

4.       What’s included and not included in the base price the property

5.       Any extras and upgrades are calculated properly

6.       Copy of the upgrades

7.       Any other conditions

8.       Payment –clearly defined for the deposits

9.       Receipts of the deposits

10.   New housing tax rebate applicable

11.   Home warranty documents

12.   Condominium documents

13.   Dates mentioned- closing, interim occupancy & delays

14.   Irrevocable date

 

 

What does a broker/ lender look out for?

When a mortgage broker or lender receives an agreement of purchase and sale, he/she will look out for the following:

 

1.       The date of the agreement

2.       The buyers name (who is going to be on title)

3.       Address of the property

4.       Purchase price

5.       Deposit paid

6.       Closing date

7.       Terms & Conditions

8.       Amendments

9.       Waivers

 

Therefore, the whole purchasing property can be difficult, if you are not sure where to start. The first step is to find a reliable real estate agent. RateShop is a preferred mortgage brokerage that has its own in house real estate agents. If, you’re looking for a property or already put down an offer to purchase a property, we can help with both. Call us today to discuss your options!


Payal Payal 04/03/2019
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