News Articles

BUYING A HOUSE

People buy and sell houses regularly.  They sign Offers to Purchase frequently without fully understanding the consequences of doing so.  An accepted, unconditional Offer to Purchase is a contract which is binding on both parties.

The Vendor must understand that such a contract can be enforced against him by an action for specific performance, which means on tender of the purchase price, the Court will transfer the land to the Purchaser.  The seller must be sure that he wants to sell and that the terms are acceptable before committing himself to the contract.

It is usual for the Purchaser to pay a deposit, which may be lost if the transaction is not completed.  It is important for the Purchaser therefore, if he requires mortgage financing, to make the Offer conditional upon financing so that the deposit may be returned if financing is not available.

The financing condition must be certain to be enforceable.  It must have a time frame and must express basic terms of the mortgage acceptable to the buyer.  Otherwise, the contract might be void for uncertainty.

Real estate contracts usually give certain warranties, such as zoning or building law compliance, but also provide that warranties not expressed in the written agreement are not enforceable.  These contracts usually expect the buyer to take the property “as is”.  It is important to obtain written representations from the seller if there are concerns relative to the property as otherwise, a buyer may be stuck with what he gets.

It pays to employ a professional home inspector who will give a report on the condition of the property before signing an Offer to Purchase.  One should also obtain a Real Property Report (preferably at the Vendor’s expense) to ensure that there are no encroachments and that the property complies with local regulations.  Mortgage Companies usually require it and the Purchaser should ensure that the Report is either made available by the Vendor, or have the Vendor pay for a new one.

It is a good idea when you are both selling and buying a house, and relying on the proceeds of the sale of your house for your own payment, to make arrangements for interim financing with the Bank.  It is frequently done, but often there are problems when one is selling and buying a house to pay on an Assignment of Sale Proceeds.  The sale might fall through but you are committed to buy or, if the funds are not available, the Vendor may not let you into the house without money.  In any event, however you do it, it is important that the process adopted should be agreed by all parties at the beginning of the transaction to ensure cooperation by everyone.

However, in spite of the problems which one might face in buying a house, it is nevertheless great fun.  Just take care when you do it.

By Herbert Fielding
June 9, 2004