Anatomy of the deal
This is it. You're at an open house, plodding your
way through your dream home. It has everything on your list and then
some: safe neighborhood, hardwood floors and parking, not to mention
200-amp electrical service and closets galore.
You've seen what feels like a million other houses
and you're finally ready to put in an offer. You turn to your agent
and give her the look, the cool one that says, "I want this
house, lady. Do your thing."
But what, exactly, is her thing? You may not care
right now; you're too busy deciding if the hallway should be painted
saxon green or radicchio red.
But later, you'll ask yourself: Between making the
initial offer and collecting the keys to my new pad, what happened?
Bankrate spoke to real estate expert Sandra Chaisson,
an agent with RE/MAX Nova in the Halifax are, who agreed to pull
back the curtains and share the inner workings of how a deal is
The first thing your agent does is fill out an agreement of purchase
and sale, which spells out the details and conditions of the sale
from your perspective. It's your wish list.
This could be a firm or conditional offer. If
your offer depends on your qualifying for a mortgage, it is conditional.
There are other conditions you might want to attach to your offer,
though. "Insurability of the property, successful building
inspection, successful title search, water and septic tests if applicable,"
Your offer will include a deadline for a reply
from the sellers -- usually 48 hours -- and a deposit, typically
between three and five percent of the offered price.
In a cooler market, your offer may be accepted
as is. The sellers will sign your offer and send it back to your
agent. That means the deal is done, and you are committed to buying
the home. Skip to closing the deal.
If you don't hear back before the deadline passes,
your offer has been rejected. Often, though, sellers come back with
"This means the sellers do not accept the offer, but feel it
is a good starting point for the negotiation process," says
Chaisson. "They would formally reject your offer and submit
a counteroffer, spelling out the details and conditions deemed
You can expect to see a higher price or a different
closing date; anything is possible. You can accept this deal, but
you can't counter the counteroffer.
"If you are still interested in the property
[but not the new terms], you must submit a new offer, and begin
the process all over again," says Chaisson. "This process
of offer and counteroffer can happen several times, until either
a deal is finally agreed upon by both parties, or they decide to
Closing the deal
You need a lawyer and usually your real estate agent will recommend
one. "I can't stress strongly enough to people to work with
a lawyer who specializes in real estate law," says Chaisson.
"Deals can get complicated very quickly."
If everything is clear with your offer, your
lawyer will search the title of the property to ensure there are
no legal obstacles to obtaining clear title to it. The lawyer will
also ensure all tax payments are current and that there are no liens
on the home. This process typically takes 10 days.
During the negotiation, conditions may have
been attached to the sale. During closing, both parties get the
chance to ensure they have been met or to do what is necessary to
satisfy them. "The time allowed to perform this due diligence
varies according to circumstances, but is typically a few business
days," says Chaisson.
You need to prove to the sellers that you can
afford to buy their house. If you've already been pre-qualified
by your lender, Chaisson says, the financing clause should be wrapped
up within three days.
So what happens if some of the conditions are
not satisfied? The deal can fall through, in which case you start
going to more open houses. "Some conditions are deal breakers,"
says Chaisson, "the inability of the buyers to obtain adequate
financing being a common one."
Or you could return to the negotiating table.
If the building turns out to be uninsurable or an inspection reveals
unexpected problems, you may find yourself renegotiating. Often
the sellers agree to fix the defect before the deal is finalized,
or they reduce the price to reflect the cash you spend fixing it.
This wheeling and dealing takes place between your agent and the
"By far the most common issue that arises
is a latent defect in the house: an oil tank or wiring which is
too old, in which case the house is not insurable; defects which
came to light as a result of the building inspection, such as a
foundation which leaks," says Chaisson.
During closing, you have time to make sure the
property is insurable, usually five days. You don't have to insure
the property, as you don't officially own it yet, but you need to
make sure there aren't any features that will make it impossible
to insure when you move in.
"These days, insurance companies are very
prickly about what they insure. What used to be a given no longer
is, and this clause can occasionally be problematic due to heating
systems, wiring, roofs, oil spills and so on," says Chaisson.
At closing, the sellers will provide your lawyer
with a ton of documentation, including 12 months of heating bills,
a property condition disclosure statement, current tax assessment
and copies of lease agreements for any leased equipment, such as
furnaces and hot water heaters.
Once all the conditions are met, a sold sign
goes up on your dream home.
On the actual closing date, often between 30
and 90 days from the time you make your initial offer, you should
do a walk through of the house. Make sure it has no major structural
damage and that the appliances work. If light fixtures or built-ins
were part of the deal, make sure they're in good condition.
"After walking through the house, the buyers
should meet with their lawyer to sign all of the documents, release
the funds to the vendors and pick up the keys," says Chaisson.
Jasmine Miller is a writer