Deposit
The amount of the down payment differentiates the serious buyers from the casual market checkers. In Toronto, it is the norm to offer a down payment with your offer. This token amount in most cases is 5% of the total value. It has also been observed that a higher down payment can in some circumstances result in a lower overall price. A buyer does not have to worry about losing the down payment. If the deal falls apart the money is usually refunded. There are some circumstances where it would not be refunded but those are few and far between.
The legal structure related to the financial side of a real estate transaction is very well developed in Toronto. The down payment is supposed to be credited to the brokerage’s trust account within a couple of working days. To be absolutely sure that the offer money will not get lost in the transaction, it is advisable to address the beneficiary as the agent’s brokerage, “In Trust”. Trust accounts were developed to protect both sides of a deal the seller and the buyer.
Based on the terms and conditions of the Sale agreement, the deposit money is credited in an account that has an interest rate attached. Till the time the deal is settled, the buyer is the owner of the deposit money and any interest. Once the deal has been finalized, the seller gets the offer money and the buyer gets a cheque for the interest amount. Social insurance numbers are required if the interest amount is paid via cheques and T5’s are required.
Traditionally, in Toronto, the deposit is provided once the offer has been accepted. Then after the closing the remainder of the funds are transferred to the seller. The purpose of the down payment is to demonstrate that the buyer has full intent of closing on the property on the close date as outlined in the sales agreement.
Suggested Clauses for inclusion in the Offer
It is important for the home buyer to include certain clauses in the offer to help ensure they get the best possible deal. Your experienced Toronto real estate agent should be able to provide you with clauses to include in the offer. Some clauses may not be accepted by the seller so be sure to know which ones are important and which ones you can concede during the negotiations.
Listed below are some pretty standard clauses that are good to include:
Home Inspection
Dependent on home inspection is a very standard clause in Toronto that should be a non-issue. A thorough, meticulous inspection performed by an experienced home inspector is key for the buyer as it should reassure you as you know the exact condition of the house.
Financing
Including a clause that says the deal is dependent on financing is a fairly common clause but it is also a bit of a warning sign for sellers. This is because it shows that you have not yet been preapproved for your mortgage. So you may not be in a position to financially close on the deal. Its easy to be preapproved so do it. Try and avoided including this clause if possible.
Condition based on the sale of current property
Most often, reasonably priced houses in Toronto do not sit on the market for long. However, certain properties – for various reasons – do not move. For those kinds of long unsold properties buyers will present a conditional offer. The condition says that buyer will buy the seller’s property only if they are first able to sell their own. Due to the level of uncertainty associated with this clause this is sometimes a contentious issue during negotiations.
Have backup plans and prioritize your Needs
Know what you need and prioritize them . In any negotiation you have to make compromises so know which clauses you are willing to be flexible on and which you are not. Put yourself in the seller’s shoes and think about how they are likely to react.
Go through the details
There are a lot of details associated with buying and selling a home; terms and conditions, price, key transaction dates, key points in sale document, and final deal date. Be sure to take your time and go through all of these details carefully because once you sign the document you have a legal obligation to abide by it.
