Buying a property
What you should negotiate
You’ve found a home that seriously interests you and you’re ready to make an offer. Eureka.Home strongly recommends that you to come to a verbal understanding with the seller before drawing up your offer.
The offer to purchase will contain certain points and conditions. For example, what will be included and excluded – furniture, appliances or other items – in the sale?
What can and cannot be negotiated?
- What you should negotiate
- What is non-negotiable
- An offer conditional to the sale of your own home?
- Who pays for the conditions?
You can negotiate any conditions you like… just remember that the seller can also refuse them. For example, many buyers will refuse offers from sellers who don’t have a pre-approved mortgage.
What you should negotiate
Here are the main points of negotiation:
This is usually the most important point.
Your chances of getting a lower price will be better if backed by solid arguments, like comparing the property you are buying to similar ones or pointing out that major work needs to be done (such as replacing vermiculite contaminated insulation).
The inspection will reveal if any major work needs to be done. If so, you can try to negotiate a price reduction.
Inclusions and exclusions
- o Inclusions are items (appliances, furniture, etc.) the seller agrees to leave to the buyer as part of the sale.
- o Exclusions are items (appliances, furniture, etc.) the seller does not agree to leave to the buyer as part of the sale and will remove from the premises.
Make sure the inclusions and exclusions are clearly indicated in the offer to purchase.
The seller may not want to hold on to certain items. For instance, how will the pool table fit into the seller’s smaller new apartment? You could save a bundle by purchasing these items at a good price.
Sale date, occupancy date and time
The sale date is the day when you officially become owner of your new home.
Occupancy is the date and time when the former owner vacates the premises and you take possession of your new home. Ownership and occupancy can occur at the same time, but not always. For example, you can become owner of your new property after signing the deed of sale at the notary, but then give the former owner a month to organize his move before you take possession.
If there is a delay between the sale and occupancy, the former owner will temporarily live in your home, like a tenant. During this period, you are not allowed to enter your new home unless the former owner permits it, like in any rental.
Some buyers will charge rent for this period. This must be specified in the deed of sale.
On the other hand, charging rent is not always well received during negotiations. The seller might feel offended to have to pay rent to live for a few days more in a home that, up until very recently, belonged to him. Compared to the price of the home, the rent represents a very small amount. Most buyers allow former owners to live rent-free in their former homes, so that they have more time to organize their move. That said, it’s your decision and you can charge any rent amount you consider fair… and the seller can choose whether or not to accept this condition.
During occupancy, the seller is obliged to transfer the property to you in the same condition as when it was sold. Until you take possession, the former owner must also keep the same home insurance policy.
A hidden defect is a serious problem that reduces the value of your home.
Here are two important facts about hidden defects:
- The seller is responsible for hidden defects, even if he is unaware of them. Even if the seller is represented by an agent, this doesn’t change anything.
- There is no time limit. You can pursue the former owner of your home years after buying it. However, the hidden defect must have existed at the time of the sale.
Important! For a defect to be considered “hidden”, it must meet the following three criteria :
- 1. The defect must be undetectable during the sale, even during professional inspection. For example, if the basement is prone to flooding each spring, the new owner might not have noticed this if he bought the home in autumn. This is considered a hidden defect. On the other hand, if the foundation is cracked and visibly apparent when viewing the basement, then the defect isn’t hidden.
- 2. The buyer must not be aware of the defect. Taking the example above, if the seller’s declaration specifies that there are flooding problems, then the seller has informed you and it’s no longer a hidden defect.
- 3. The hidden defect must exist at the time of the sale. If the foundation starts to crack years after you buy a home, this is not a hidden defect, as it was in good condition when you bought your property.
As a general rule, homes are sold with a warranty against hidden defects. If nothing is specified, the property is automatically covered by this warranty.
This said, to protect themselves, some owners sell their homes “without legal warranty”, so that hidden defects become the buyer’s responsibility.
If you want to buy a home sold without legal warranty, you should get some form of compensation, such as a price reduction according to market value. However, the seller might have already adjusted the price accordingly.
False declarations by sellers
It is against the law for sellers to make any false declarations.
For example, if the foundation is completely cracked, some sellers will cover up the defect by filling and painting the cracks without repairing the foundation, then declare that, to their knowledge, there are no foundation problems.
This is a false declaration, as the seller knows this is untrue. Even if the home was sold “without warranty” against hidden defects, this doesn’t change anything: the seller is always responsible for any fraudulent declarations!
Thus, if after the sale, you realize that the seller made a false declaration, you can pursue him for the loss of value on the home or for ensuing damages.
If, during the buying process, you notice that the seller made a false declaration, do not buy his home. This person isn’t honest and could very well be hiding something else…
Each condition must be met within a strict deadline. For example, the seller can give you two weeks for a home inspection and another week for you to come back with an answer regarding the inspection results.
The Eureka.House Sample Offer to Purchase includes the standard deadlines. If you cannot meet these deadlines, let the seller know why and agree on new deadlines.
If you do not respect deadlines, you lose your right to cancel the sale. For example, if you inform the seller only after the deadline has passed that inspection revealed a major defect, then you lose the right to cancel the offer to purchase.
Important! The seller must be cooperative! If the owner is never available for your inspection, then he will be at fault and you can cancel your offer.
What is non-negotiable
Certain conditions cannot be negotiated and must be included in the offer to purchase.
Here are the non-negotiable conditions of sale:
Obtaining a mortgage
Eureka.House strongly advises that you get pre-approved for a mortgage before making an offer; otherwise sellers might not want to waste their time dealing with you. We actually advise sellers not to negotiate with buyers who have not been pre-approved for a mortgage.
The offer to purchase must be conditional to obtaining a mortgage (or, proof that you have the funds to purchase your property without a mortgage).
Important! Pre-approval is not a mortgage. You must obtain a “real” mortgage loan specifically for the home you want to buy and before the deadline expires. Otherwise, the offer can be cancelled!
It would be unwise to buy a home without having it professionally inspected.
Let’s say you don’t have a home inspection and after you’ve moved in you notice that the walls are crooked and starting to deteriorate (which is likely a hidden defect – see our section on hidden defects and sale without legal warranty). In this case, you have no recourse against the seller.
A qualified inspector will inspect the roof, the foundation and other features of your home. You will receive a written report that will give you a better idea of any work that needs to be done.
If, during the inspection, the inspector finds that major work is required, you can ask for a price reduction or cancel the sale.
The offer to purchase must include a condition in which you must carry out an inspection and decide whether to approve the inspection report. If the seller refuses to include this condition or asks you for another arrangement, walk away from the sale.
You have the right to do any tests you deem necessary.
Here are the most common ones:
- Pyrite testing beneath the cracks in concrete slabs
- Vermiculite testing for contaminated insulation
- Water quality tests, if water is not provided by the municipality
- Verification of the septic system, if the property is not connected to the municipal sewage system.
As with inspections, the offer to purchase must include a condition in which you must approve or disapprove the results of these tests. If the seller refuses to include this condition or asks you for another arrangement, walk away from the sale.
Divided and undivided co-ownership documents
If the dwelling you are about to purchase is a divided or undivided co-property, you have the right to verify the declaration of co-ownership, the building regulations and the financial soundness of the condo association.
The offer must therefore include a condition in which you must approve or disapprove of these documents. As with the inspection, if the seller refuses this condition or asks you for another arrangement, walk away from the sale.
Divided co-ownership :
- You will be sole owner of your dwelling.
- You will not co-own the other dwellings.
- You will co-own the common areas.
- You will co-own the entire building, including all dwellings and common areas.
- Similarly, ownership of your dwelling will be shared between all co-owners. Therefore, you will not be sole owner of your own dwelling.
Feasibility of building modifications
You might want to make modifications to the property, such as adding an extension.
In this case, the offer to purchase must include a condition in which you must obtain necessary authorization (for example, municipal permits) to carry out the work and within a reasonable budget (for example, obtaining a quote from a contractor).
Most sellers accept this condition without negotiation. However, some might find this too complicated and refuse – which is their right. If you still decide to buy the property, you may not be able to make the modifications you want.
An offer conditional to the sale of your own home?
Some buyers make offers conditional to the sale of their current property.
If you make a conditional offer and cannot sell your own property within 30 days, or by the deadline, then your offer will fall through.
Eureka.House strongly recommends that you do not make a conditional offer. Here’s why :
- The seller is not reserving his/her home for you; only the price has been accepted. The seller can receive other offers and accept them.
- You have less negotiating power on conditions such as the price or dates. You might end up paying too much for your home.
- In the meantime, if you find another property you like better, you cannot buy it because you are still tied to your first offer.
- Eureka.House advises sellers to refuse conditional offers, so yours likely won’t be accepted.