Purchase and Sale

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Understanding Your Agreement of Purchase and Sale

Disclaimer: This article on your agreement of purchase and sale is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

While the market has cooled recently, it is still incredibly competitive for first-time home buyers. In fact, the number of purchases made by first-time home buyers in Toronto has decreased to 27% (compared to a national average closer to 50%).

It can be hard to find a house that feels like home. It is harder still to find one that you can afford. So, when you do find the perfect place, and your offer is accepted, it’s understandable that you would want to jump right in and sign on the dotted line.

However, before you do that, you must understand what you agree to and what is in your Agreement of Purchase and Sale. A lawyer should always review your Agreement of Purchase and Sale before signing, and we encourage you to get in touch with a real estate lawyer early in the process to ensure a smooth closing.

In this article, we will outline what an agreement of purchase and sale is, what is included and help you become familiar with some of the terms it contains.

buying a home - make sure you understand your agreement of purchase and sale

What is an Agreement of Purchase and Sale?

An Agreement of Purchase and Sale is a contract between a buyer and seller. It outlines the terms of the sale of a property. 

Since it is a legally binding document, you must understand all of the terms before signing. In Ontario, the most common Agreement of Purchase and Sale template is provided by the Ontario Real Estate Association (OREA) (the professional association that represents real estate agents and brokers). 

What is included in an Agreement of Purchase and Sale?

Here is a brief overview of what is included:

  • The legal names of the buyer and the seller
  • A description of the property being sold (this means the address and legal description) 
  • The offer price
  • The title search date
  • The closing date  
  • The deposit amount and when/how the buyer will pay it
  • Any fixtures or chattels* that are included in or excluded from the sale
  • Conditions of the sale (i.e., financing, home inspection, etc.)
  • The signatures of both parties

*What is the difference between fixtures and chattels? Fixtures are items that are permanently attached to the property, such as built-in shelving or a stove. Chattels are items not attached to the property and can be removed by the seller, such as a washer and dryer or a piece of art.

Common Conditions

While you can certainly submit a “clean offer” (meaning one without conditions), there are some conditions that your lawyer or real estate may recommend.

Financing Condition

This condition is probably the most important as it protects you if you cannot get a mortgage. As noted, this has been happening more often recently, as the value of homes has decreased in some areas. If your financing falls through and you have included this condition, you will get your deposit back and are not obligated to purchase the property.

Home Inspection

We recommend that you get a home inspection even if the property is new construction. Your home inspection will help you identify potential problems that may need to be fixed.

Sale of Buyer’s Property

If you are selling your home and buying another,  you may want to include a condition that the sale of your property is a requirement for you to purchase the new one. This condition protects you in case your home does not sell in time.

Why should a lawyer review your agreement of purchase and sale?

Once you sign your Agreement of Purchase and Sale, there may be very little that can be done to change the terms.

A lawyer will review the Agreement of Purchase and Sale to ensure that it meets your needs and that you understand all of the terms. They will also look for any inconsistencies or potential problems.

Understanding Your Agreement of Purchase and Sale – Advice You Can Trust

Buying a home is a significant change for you and your family, and we want things to go as smoothly as possible. That is why we work with your real estate team to ensure that you understand your Agreement of Purchase and Sale and answer any questions you may have.

At Beeksma Law, excellence is our minimum standard. We strive for excellence, whether it’s our strategic legal advice or how our team takes the time to make sure you are familiar and comfortable with your agreements. Contact us today to learn more about how we can help you.