This article is Part 2 and is going to discuss page one of the OREA Agreement of Purchase and Sale for standard resale homes. Specifically, we are going to focus on the deposit and purchase price. When you finally find the property you love the next part is to find the magic number that will seal the deal. Often times an offer will go back and forth between a home buyer and home seller until the price is right.
The purchase price in the Agreement of Purchase and Sale is the amount on which Land Transfer Tax will be payable. However, the amount due on closing will vary and is dependent on the statement of adjustments and the deposit paid. The statement of adjustment adjusts items such as municipal property taxes and fuel oil where applicable, as the new purchaser will only be responsible for the latter items from the date of possession forward.
The deposit monies may be paid by the buyer at the presentation of the offer or upon acceptance of the offer. It is industry practice to have the deposit monies paid to the Vendor's Real Estate Agent in trust pending completion of the Agreement of Purchase and Sale. The deposit monies that are held are then applied to the applicable commission with respect to the transaction with any difference being refunded by the Real Estate Broker to the home Sellers.
The amount of one's deposit monies should be strategically calculated but, depending on the state of the market, home buyers may have little to no bargaining power, especially in the hot market that Toronto and the Greater Toronto Area have seen as of late. The reason I state that the deposit monies should be strategically calculated is related to the conditions within Schedule "A" to the Agreement of Purchase and Sale. Many people feel that these conditions within Schedule "A" can be "deal cancelling provisions", however, such is not the case. Once an Agreement of Purchase and Sale is signed, both the home Sellers and home Buyers have a duty to make a good faith effort to carry out the terms agreed to within the Agreement to ensure completion of the transaction. Where things go bad, the deposit monies paid can become the hostage of the home Seller should they believe that the purchaser did not exercise the conditions in good faith. This is where the strategic part comes in, home buyers can consider staged deposits, however, in a hot market, your "conditional Agreement" may be tossed aside. A purchaser choosing to utilize staged deposits will increase the deposit monies as conditions are satisfied. With this method, your deposit monies that are held hostage may not be as significant.
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