Humber Real Estate - Course 2, Module 18, Completing a Residential Agreement of Purchase and Sale, Countering an Offer, and Working with Competing Offers

A sign back. A counter offer is also known as what? - Offer date - Irrevocable - Expiry of conditions - conditional date - Requisition - title search date - Completion or closing date Note: The order of these dates does not follow the order on the agreement of purchase and sale. Using this chronological order will help you to determine when different activities must occur for the transaction to be successful. An offer plan should itemize what dates in chronological order? 1. List the conditions with short timeframes, for example to obtain A) Financing, B) Inspection, and C) Insurance. These conditions can be fulfilled in a week. 2. For a condition with a longer period, such as D) the sale of a buyer's property, the conditional period will be longer, for example 30 days. 3. Use one condition with the same timeframe for A, B, C and D and add an escape clause with a 48-hour notice period. What steps should you use to organize the clauses when drafting an offer plan? Yes. Therefore if a condition requires an escape clause, keeping it separate allows other conditions to be met separately. Does waiving one condition in a stack result in all conditions being waived? 1. Review clauses 2. Be precise 3. Group clauses 4. Be concise 5. Redraft offer What steps should you follow to reduce the wordiness and make terms clear when you are writing multiple clauses? This helps to simplify requirements. e.g. the buyer of a rental property might want to include a review or confirmation of the following items: Tenant records, rental amounts, fire safety issues, building code compliance). You could group these items under one condition that states the property meets all these requirements. When drafting an offer, describe how grouping clauses can help to simplify a condition. A way of grouping and writing conditions that are required to be fulfilled by the same date. What is 'Stacking'? Grouping together the financing, insurance and lawyer's approval clauses that require the same 5-7 days. What is an example of 'Stacking'? July 14 If a condition expires "60 days after the offer date" and the offer date is considered May 15, when will the condition expire? The right to visit the property once before closing. Remember - this is a RIGHT, not a condition, therefore it wouldn't be stacked with any other clauses. What right is often included in Schedule A under 'Other Clauses'? Because the good working order warranty lasts until completion of the sale. Why would you not stack a warranty on chattels and fixtures being in good working order until closing? Amends Once a seller _________ the buyer's offer, the buyer is no longer obligated to their own offer. 1. When the offer is rejected: That is, the seller does not accept the offer nor make any offer back to the buyer. The listing brokerage is required to retain the unaccepted offer and all other documents received relating to the offer for 1 year. 2. When an offer is being countered: That is, the seller is making an offer back to the buyer. The seller's brokerage is required to retain a copy of the buyer's offer, as submitted, for one year. As a listing salesperson, this requires you to ensure there is one copy of the buyer's offer, as submitted, retained prior to completing a counter offer by the seller. What additional requirements relating to document retention pertain to the seller's brokerage only, in relation to offers that are unsuccessful? Note: Only applicable in purchasing real estate and not leasing. Separate offer *In some instances a brokerage will keep a summary document instead of the original unsuccessful offers. For every written offer that you receive on behalf of a seller, whether it is a buyer's first offer or an offer with changes made during negotiations, the offer is considered a _________ _______ and the seller's brokerage is required to retain a copy. 6 years How long must a successful offer be kept in its entirety (the agreement of purchase and sale) by the brokerage? - The seller's brokerage receives the offer on behalf of the seller - The offer is made through a brokerage on behalf of the buyer - The offer did not result in a transaction, that is, the offer was not accepted - The summary contains all the required information Under what conditions can you use a summary document rather than the seller's brokerage retaining the offer in its entirety? 1. Buyer's name and signature 2. Seller's name and contact information 3. Name of the buyer's brokerage and their representative 4. Name of the seller's brokerage and their representative 5. Address, legal description or other identifier of the property 6. Date and time the offer was made 7. Date and time the offer was received by the brokerage and how the offer was received, such as in person or by fax 8. Date of presentation, if the brokerage presented the offer to the seller 9. Date and time, if any, until which the offer was irrevocable When using a summary document in lieu of retaining the offer, what specific information does REBBA require to be included in the document? Agreement of purchase and sale Although a summary document can be used rather than retaining an unaccepted offer in its entirety, it's important to understand that the summary document cannot be used as a substitute for the ________________________________ form during negotiations. By drafting a new offer and having the buyer sign it. Then retaining the previous offer paperwork on-file in case questions arise about the previous negotiations. Since the same agreement is used to make counter offers, etc., it can become messy and hard to read. In this case, how can a salesperson fix this issue? 1. Written changes (to be initialled by all parties) 2. Draft a new offer. 3. Prepare a counter offer form (to be signed by all parties) To counter an offer, what 3 options do you have? The party is crossed out (i.e. buyer) and is replaced with the other party (i.e. seller). During a counter offer, even if the time and date stay the same, the irrevocable is updated how? - Initial all changes made by the seller - Complete and sign the Confirmation of Acceptance on the agreement of purchase and sale - Complete and sign the Acknowledgement portion of the agreement of purchase and sale To accept a counter offer from the seller, the buyer must do what? - Provide a copy of the accepted offer to each buyer - Sign the Commission Trust Agreement on the agreement of purchase and sale and obtain the listing brokerage's signature when providing documents to the listing salesperson - Provide copies of the accepted offer to the listing salesperson - Retain a copy of the accepted offer for the brokerage's records As the salesperson for the buyer, when accepting the offer, you are required to complete what steps? The Acknowledgement What clause does the buyer sign after the Confirmation of Acceptance where they provide their lawyer's contact details, and confirm they have received a copy of the completed agreement? So they can make the required disclosures if they are in multiple representation. If there are competing offers, with 2 buyers from 1 cooperating brokerage, the listing brokerage should advise each salesperson from the brokerage ... why? Yes. In this case they can choose not to participate in a multiple offer scenario. If a buyer's offer has not been presented to the seller or the seller's salesperson, does the buyer have the option to withdraw their offer? - The brokerage represents the seller and the buyer in a transaction. This applies whether it is the same salesperson or different salespersons employed by the brokerage. - The brokerage represents multiple prospective buyers making an offer in a single transaction. This can apply when the seller is represented by the same brokerage or a different brokerage. In a competing offer situation, multiple representation could occur when? An offer is made The Code requires a brokerage, when representing or providing services to more than one seller or buyer for the same trade, to disclose in writing (at the earliest opportunity and before ____ _________ ____ ______, the nature of the brokerage's relationship to each seller and buyer. True. This disclosure must be made in writing to all competing buyers. True or false? A listing brokerage that represents both the seller and the buyer must make this disclosure to all other competing buyers. True. Details and terms must be made in writing to all buyers who have made a written offer. True or false? A listing salesperson can offer to reduce their commission if they have a competing offer provided proper disclosure is made. - A salesperson represents both a seller and a buyer - The listing salesperson offers a discount to the seller - The reduced commission serves to entice the seller to choose the buyer with the collateral agreement - The salesperson representing both the seller and buyer must disclose the discount to other competing buyers List 4 specific facts about a collateral agreement and what it involves. - You must have written consent from both the seller and the buyer - You need to disclose to anyone with a written offer if you are representing both the seller and the buyer - If you are the listing salesperson and receive 2 offers from the same co-operating brokerage, you are responsible for informing their salespeople of the multiple representation situation What are the 3 rules that apply to multiple representation in competing offer situations? - Best offer first - Pre-approved mortgage (though it doesn't guarantee funds will be advanced) - Deposit (larger and by certified cheque provides assurance to sellers) - Proof of funds (a letter from the lender indicating the buyer's financial ability. This can increase the seller's confidence in the buyer's offer) - Completion date (see what the seller's preference of closing date it as listed on the listing information) - Conditions - Inclusions (buyers might want to leave out the chattels to simplify the offer and make it more appealing to the seller) - Irrevocable Period (can be a pro or con depending on the situation) What are some strategies for working with a buyer in a multiple offer situation? 1. Conditions - If a seller accepts an offer with conditions, the risk is the potential loss of the transaction if conditions are not met. Along with that loss is the potential loss of offers from other interested buyers. - A buyer not including conditions can also be risky (i.e. no home inspection or arranging of financing) 2. Countering Offers - The seller can counter an offer for one of the buyers. That buyer, however, may decide against the counter offer. Other buyers who made offers may have placed an offer on a different property, resulting in the seller losing the opportunity to accept or negotiate other offers 3. Rejecting Offers - The seller can reject all offers and advise buyers to bring back their best offer at a specific time. This strategy might result in buyers deciding not to participate. Once an offer is rejected, a buyer is no longer obligated to the offer. What are the 3 factors sellers should consider in offers and their associated risks? - Irrevocable period (If a seller can negotiate one of the offers during the irrevocable time period of the other offer, this would allow the seller to still consider one of the other offers should the offer they chose to negotiate not result in acceptance) - Offer presentation time (allows the seller to have as many buyers view the property and consider placing an offer before addressing any offer. The intent is to generate interest, build competition and produce more offers for the seller to consider. - Property inspection report (offering one to all buyers during the property viewing would indicate the seller is providing as much information possible about the property) What are some strategies for sellers when working with multiple offers?