Published on: October 10, 2017
Updated on: March 05, 2018
Article number: 204034

For a clear understanding of the promise to purchase

The Real Estate Brokerage Act provides the OACIQ with a range of tools to protect you. The Promise to purchase form is one of them.

The promise to purchase is a defining step. By signing it, you engage in one of the most important transactions in your life. It’s better to be well-informed!

What’s a promise to purchase?

The promise to purchase is the means by which you inform the seller of your firm intention to purchase his property under certain conditions. In this form you establish, among other things, the conditions under which you wish to purchase the desired property. It becomes a formal commitment binding on you once it’s accepted by the seller. This is therefore a step that should be taken seriously and dealt with in good faith.

Good faith is...
Acting sincerely, loyally and honestly to fulfil the commitments under contract. Fulfilling one’s obligations within the specified time frame.

For the seller, recording in writing everything he knows about the condition of his property for example (in the Declarations by the seller of the immovable form).

For the buyer, ensuring to have the financial capacity to buy the desired home for example.

For the broker, informing you of everything that could affect the transaction for example.

What are the steps of the promise to purchase?

The Real Estate Brokerage Act clearly defines the duties and obligations of the professionals authorized by the OACIQ. Here is an overview of what you can expect from your broker during each step of the promise to purchase.

Before

The promise to purchase includes several clauses. The professional authorized by the OACIQ must advise and inform you objectively.

He must, among other things:

  • help you fully understand the information provided by the seller on the history of the property mentioned in the Declarations by the seller of the immovable form.
  • ensure that the desired property suits your needs and the budget you established.
  • help you set the price you will be offering to the seller by presenting you with his analysis of comparable properties. Since the price should take into account the seller’s declarations, you cannot then invoke elements mentioned therein to get a price reduction.
  • ensure that the intended use of the property is compliant with the regulations. Example: is the lot contaminated or can it be used for the intended purposes?
  • make sure you have all the necessary documents on hand in order to make an informed decision. For instance, if the certificate of location is more than ten years old, the notary may require a new one. So it’s better to discuss it with your broker at the time of the Promise to purchase. For more information, read this article Importance of an up-to-date certificate of location.

During

Take the time to carefully read the Promise to purchase before signing it and don’t hesitate to ask questions.

Therefore:
  • Check with your broker that all of your conditions are listed: financing, building inspection, items that are included or excluded from the sale (lighting fixtures, dishwasher, alarm system, etc.). Be clear and precise in order not to leave room for interpretation.
  • With your broker, check the time period given to the seller to respond to your offer and the desired dates to sign the deed of sale at the notary and take possession of the premises.

After

The seller can refuse your offer, accept it in full or make a counter-proposal.

Offer refused
Even if your offer meets all the seller’s conditions, the latter can refuse it. If you are interested in the property, nothing prevents you from presenting a new Promise to purchase to the seller.

Offer accepted
Once your offer is accepted, you must fulfil the conditions set out in the Promise to purchase within the specified time period. The most common ones are to obtain the necessary financing and have the property inspected by a recognized expert.

Counter-proposal
If you receive a Counter-proposal to a promise to purchase, this means that the seller refuses your offer, but could accept it under certain conditions. This could be an enhanced price or items he wishes to exclude or modify. In turn, you may accept, refuse or respond through a counter-proposal as well.

Note that a counter-proposal cancels all the previous ones. To modify the terms of a promise to purchase that was already accepted by the parties, your broker will need to use the Amendments form.

And if I want to cancel my promise to purchase?

The answer differs depending on whether it is a new or used property.

Used property

The Civil Code of Québec gives the buyer a short period in which he can withdraw his offer, which is the period between the time the Promise to purchase is signed and the time when it reaches the seller.

Once the seller has received the Promise to purchase, you are bound by the content of your offer, subject to the terms and conditions provided.

New property or under construction

The Civil Code of Québec gives a buyer ten days to cancel the preliminary contract by which he promises to buy the property, usually signed with the builder or developer. Note however that the latter may claim up to 0.5% of the agreed selling price. For a property of $300,000, this means an amount of up to $1,500.

 

To learn more, read:
The Buyer’s Guide
The article Very low offer price: The obligations of brokers involved

For any questions, please contact Info OACIQ by email at info@oaciq.com or by telephone at 450-462-9800 or 1-800-440-7170.