Buying a home is one of life’s most exciting milestones – regardless of whether you’re purchasing your very first or fifth property! There are lots of steps to understand when it’s time to make an offer, however, in order to ensure the home buying process runs as smoothly as possible. We’ve compiled some important details below to help you make informed decisions every step of the way.

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Key Takeaways

• Your negotiating power will depend on a few factors, including the current market conditions in the immediate neighbourhood. Are you in a seller’s market? Buyer’s market? Balanced market?
• In most cases, you’ll be required to provide an upfront cash deposit, which is used to demonstrate to the seller that you’re committed to making the purchase
• Going in firm on an offer is not highly recommended, even in a hot market. That’s because if you can’t follow through on the purchase for any reason, you’re contractually obligated to buy the property 

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Understanding the paperwork

Once you’re found a property and you’re ready to make an offer, your real estate agent will draw up the necessary paperwork. 

Your offer must include:

• Your legal name, the name of the seller and the property’s address
• The amount you’re offering to pay (the purchase price) and the amount of your deposit
• Any extra items you want included in the purchase (eg, window coverings)
• The date you want to take possession (aka, closing day)
• Request for current land survey
• Offer expiration date
• Any conditions that must be met before the contract is finalized (eg, pending financing or a satisfactory home inspection)

Navigating price negotiations

You should expect to negotiate. While the process can be stressful, it’s all about arranging the best deal for both you and the seller. 

Your negotiating power will depend on a few factors, including the current market conditions in the immediate neighbourhood. Are you in a seller’s market? Buyer’s market? Balanced market? This will dictate whether you can make a lowball offer, offer the asking price or go above asking. The demand for homes in the area, amount of housing inventory and number of days the property has been on market will all impact the type of offer you should make. Your real estate agent is the best person to further advise on these details.

Showing you’re serious: Making a deposit

When buying real estate, in most cases, you’ll be required to provide an upfront cash deposit, which is used to demonstrate to the seller that you’re committed to making the purchase.

There’s typically no minimum deposit required – the amount is determined by the seller – but a general rule of thumb is at least 5% of the purchase price. And once the home closes, you can redirect those funds towards closing costs and your down payment. See: House Deposit vs Down Payment✋

Important: Once you make a deposit, be prepared for the seller to keep it even if you don’t go through with the purchase.

Being prepared to pay at least 5% down

The minimum down payment when buying a house in Canada is 5% of the purchase price for a home valued at $500,000 or less and 10% for the portion of the purchase price above $500,000. 

If you can make a larger down payment than the minimum requirement, your mortgage payments will be lower and it will take you less time to pay off your mortgage. The smaller your mortgage and the lower amount of interest you’ll pay over your time as a mortgage holder, the quicker you can build home equity. See: How Much do You Need for a Down Payment in Canada?

Closing in a hot market: Considering a firm offer

Going in firm on an offer is not highly recommended, even in a hot market. That’s because if you can’t follow through on the purchase for any reason, you’re contractually obligated to buy the property. 

If you include conditions in your offer – such as pending financing or a home inspection – you’re carving out room to safely back out of the deal if need be. 

The safest way to put in an offer without conditions is to get preapproved for a mortgage and have a pre-inspection completed on the home before the time of offer so you’re confident that you’re not buying a money pit. See: 6 Things You Need to be Preapproved for a Mortgage✋

Important: In hot markets, appraisals can often come in lower than a bidding war offer. This means you should have extra money set aside for a larger down payment, if necessary, because the lender will loan you money based on the appraisal amount.

Negotiating your purchase agreement

Your offer price point negotiating power will depend on a few factors, including the current market conditions in the immediate neighbourhood. Are you in a seller’s market? Buyer’s market? Balanced market? This will dictate whether you can negotiate on price and, if so, by how much. 

There is often room for negotiation, however, beyond just the purchase price. You can also ask for more favourable terms as part of your purchase agreement such as repairs, inclusions and closing date.

An experienced real estate agent will understand the market conditions and advise you on what you can realistically negotiate. In a buyer’s market, you have more power knowing that there are plenty of other options on the market. But, in a seller’s market, you’re in competition with other buyers willing to negotiate for the same property, so quick action and a strong offer are more likely to help you win the bid.

Consulting with a professional real estate lawyer before signing

Your offer is a legally-binding contract. As such, it’s vital for you to read and understand everything outlined in the paperwork. 

As a buyer, you have the option to take the offer to a lawyer for review prior to signing anything. It’s always recommended that you never sign anything you don’t understand.

When in doubt, ask questions until you feel comfortable signing this important document, which represents among the largest purchase you’ll likely make throughout your lifetime.

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