Making an offer on a Condo
It’s the most anxious, uncertain, sweaty-palms moment in the whole condo buying process. You've locked in a mortgage pre-approval. You've done your research and know what you want to buy. You’ve fallen in love with a suite and you want it. You want it bad.
A great agent shines here. It is critical to have everything considered, completed, double-checked, and approved before the offer owl is sent into the air.
Is that really how offers are sent? By offer owl?
No. We're just breaking the tension. You and your agent huddle and strategize, and then your agent sends your offer to the seller's agent.
Making an offer on a condo happens in a few stages:
1) Preparing the written offer, called an Agreement of Purchase and Sale
2) Submitting the offer to the seller on the offer date
3) Negotiating with the seller, this is where your Realtor kicks some ass
4) Finalizing all the conditions of the agreement
5) Signing the paperwork and closing the deal
What do I need to know before making an offer on a condo?
By now your Condo Pro should have prepared you for victory. Two of the most important things to know before making an offer are:
• That your mortgage is approved
• That the condo status certificate is good
Finalizing your mortgage approval is important because it strengthens your offer in the eyes of the seller. If you submit your offer as conditional (don’t worry we explain the terms shortly) on your mortgage being approved, any other offer with an approved mortgage will look stronger. Apart from wanting to sell for the highest price, sellers usually want to sell as quickly as possible. Once they find an offer that makes them happy, they will accept it.
Reviewing the condo status certificate is important because it ensures you know exactly what you’re buying. If you submit an offer on a condo without reviewing the status certificate, for all you know you’re accidentally buying the wrong unit, or you’re buying into a building with serious red flags like a lawsuit. This is when a real estate lawyer makes sure everything looks peachy. You’ll need your real estate agent to request the condo status certificate first. It can take up to 5 days to receive a status certificate.
The earlier you get these two tasks completed and okayed the better you’ll be when you go into the offer.
Who writes the Agreement of Purchase and Sale?
The Agreement of Purchase and Sale is the wad of paperwork that outlines all the terms and conditions of the sale of the house or condo. As with any sales contract, there is a lot of legalese that your Realtor and your lawyer will help you understand and make sure everything is prepared correctly.
You’ll see things like:
• The purchase price you’re offering and your down payment amount
• Conditions on the sale such as mortgage approval or reviewing the status certificate
• Offer dates that outline key dates in the offer, such as the completion date, and how long the seller has to review your offer. This could be 24-hours or a few days, depending on the situation of your offer.
a) Irrevocable - you can’t take the offer back until this date and time. Either a counter-offer needs to be made or the irrevocable date needs to pass before the offer is considered off the table.
b) Firm - your offer can be accepted right away because everything is prepared, approved and you have no conditions. Sellers love a firm offer.
c) Completion - this is the date when you fully receive ownership of the property, the condo or house is yours, and the deal is complete. This is also called the closing date.
• Additional items included in the sale such as furniture, appliances, etc.
How much should you offer?
Your realtor will advise you on just how much or how little to put forward. Are there competing offers or bully bids? Is your bid stronger? Would a cash deposit make your offer a winner? You may find that the condo’s asking price was above or below market value, but historical price-per-square-foot analysis will give you an accurate picture of what the property is worth.
Conditions and clauses in an offer
Most purchase agreements have conditions and clauses added by both sides that must be accepted before an offer can be fully, legally accepted. Conditions are typically included to protect you.
A good example is the condition of mortgage approval. Let’s say you find your dream condo, but your mortgage hasn’t been officially approved. You want the place, though, so you make an offer on it anyway.
Your real estate agent would advise you to include a condition that the offer is only good if your mortgage gets approved. If you don’t include this condition and your mortgage application is denied, the seller could accept your offer and hold you liable for the whole purchase price.
Offers with conditions and clauses are sometimes seen as weak offers, because the seller cannot immediately accept them and finish the sale.
Be flexible with the closing date
Sellers often value an offer with a flexible completion/closing date, meaning the deal can go through when it’s most convenient to the seller. Most sellers are buyers themselves.
Negotiating with the Seller
At this point, both real estate agents meet for a battle of wits—TO THE DEATH! Not really. But your real estate agent does negotiate to get the best deal possible.
Typically, you’ll set an irrevocable date which gives the seller a set amount of time to review your offer before you can take it back. The seller’s agent will likely send a counter-offer and negotiations will begin (back and forth four or five times on average) before you both decide on a deal that works.
The offer date (also called the offer night)
This is the only time that the seller will accept buyer offers. Sellers often set offer dates to build up competition—and price. It often leads to a multiple bid situation.
Buying Blind & Bidding Wars
As a buyer you will never know what price other buyers are offering, you will only know how many other offers have been made (though that may change in the future). An experienced Condo Pro will have dealt with buying blind situations, and they'll know what closing date, price, conditions and deposit will sway the seller to win the deal.
Bidding wars in Toronto are quite common, as condos fly off the market quickly. They happen when a property attracts a lot of interested buyers. Bidding wars typically happen when a condo price is set artificially low and/or when there’s an offer date.
The Bully Bid
A bully bid or bully offer is when someone breaks the rules of the seller’s offer date and makes an offer early. Bully bids are usually very strong (high price, few or no conditions) in the hopes of bullying the seller into accepting.
Ways to win the seller
Price is not always what wins an offer. While your realtor will help you create a competitive offer price, you also want to think about how to sway the seller. A few things that have been proven to work well are:
• Writing a personal letter to the seller and explaining your situation and why you want to buy their condo or house. The person-to-person touch is priceless.
• Being flexible with your closing date to accommodate the seller’s schedule. Some sellers may be swayed by an offer that gives them more time to move, even if it’s a few thousand dollars lower than other, more rigid offers.
Your realtor will have proven strategies for ways to reach your seller on a level above and beyond price.
What to expect at closing?
Once your offer is accepted, there are a few things you still have to do before you can pop the champagne. Your real estate agent will walk you through signing all the paperwork and finalizing any conditions that were included in the purchase agreement.
You’ll have to submit your down payment within 24 hours of signing the deal, unless you’ve made other arrangements with the seller, and you’ll want to collect your keys.
You’ll need to work with a real estate lawyer at this point to go over all the signed documents, register the house or condo in your name, and make sure all closing costs have been paid.
