You’re planning on buying your very first home in the near future. You have heard of a promise to purchase (formerly known as an offer to purchase) and you are wondering what its purpose is. Here are the main details.
The promise to purchase is the result of a series of exchanges and promises between the future home buyer and the current homeowner. All the details are written down in this document. The promise to purchase is an agreement, which defines the ground rules between the two parties. If conditions are set forth, the deadlines should be clearly stated and the parties undertake to fulfill them.
The promise to purchase is an important document because, as the title states, you commit to buy the property, but under certain conditions set forth on either side. These conditions are laid down in writing in this document.
The promise to purchase is the step that comes right before the deed of sale, which is the famous contract that officially declares you the owner of the coveted house. Just about every detail written down in the promise to purchase will be found in the deed of sale. The content is very similar.
Here is a look at the form itself. Technically, it includes the property’s address, its size, the offering price, the contact details of both parties, the cadastral designation, the preferred payment method to complete the purchase, the list of items included in the sale, the date the seller will be delivering the property and some other general information.
Next comes the obligations and commitments of the seller and the buyer. For example, the buyer declares himself satisfied with the condition of the property provided that the seller carries out a major repair before delivering the property. If the seller recognizes the legitimacy of the buyer’s request and commits to doing the work, it must be stipulated in the promise to purchase.
When the seller signs the document, he or she asserts, in writing, that the property is in perfect condition, as seen by the buyer, and that no nasty surprise will come and decrease the value of the house, such as hidden defects, disputes or a recent request from the City to undergo major work on the property or land. Otherwise, the seller is liable to a lawsuit for damages. For this reason, a Seller’s Declaration form must be duly completed and signed by the seller.
Often times, the buyer agrees to purchase the property provided that he or she can have it inspected thoroughly by an inspector. If the latter discovers a defect that may decrease the value of the property and the buyer provides the report as evidence, the promise to purchase is jeopardized. Either the discussions resume or the promise to purchase simply falls through.
Do you intend to give a deposit? The amount must be laid down in writing in the document. The money must be deposited in trust and will be withheld at the real estate agency or in the notary’s trust account until the signing of the deed of sale.
If you sign the promise to purchase, you commit to buy the property. You will need strong arguments to withdraw from a promise to purchase. Valuable reasons would be that the seller failed to respond before the deadline stipulated in the agreement or the inspector discovered a major fabrication defect.
Feel free to add any clause or appendix to the promise to purchase for your peace of mind. You must be as straightforward as possible.
If the coveted property is a condominium, the buyer has the right to review the contingency fund balance, the maintenance manual, and the preventative maintenance plan as well as the board’s meeting minutes.
Here is an example of the promise to purchase form. On the same website, you will find a few tips for the buyer and the seller. Please read them carefully before signing the promise to purchase form.
This may all seem complicated, but keep in mind that your real estate broker will assist you and explain everything in detail while making the process easier for you.