For a clear understanding 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 the buyer and the seller can expect from the broker during each step of the promise to purchase.

Before signing a promise to purchase

The promise to purchase includes several clauses. It is therefore important to take the time to read it carefully before signing it and to ask all the necessary questions. 

The real estate broker representing the buyer has a duty to advise and inform him according to his specific criteria and needs, and to explain the terms of the form. The buyer's broker must, among other things:

• Help the buyer 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 the buyer’s needs and the budget established.

• Help the buyer set the price to be offered to the seller by presenting him with an analysis of comparable properties. This price must take into account the seller's declarations because it will not be possible to invoke elements mentioned therein to get a price reduction afterwards.
• Ensure that the intended use of the property is compliant with the regulations. For example, is the lot contaminated or can it be used for the intended purposes?
• Make sure you have all the necessary documents on hand 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 preferable to discuss it with the broker at the time of the Promise to purchase. For more information, read this article Importance of an up-to-date certificate of location.
• Make sure that all the buyer’s conditions are listed: financing, building inspection, items that are included or excluded from the sale (lighting fixtures, dishwasher, alarm system, etc.). It is essential to be clear and precise about each item to be included to avoid any interpretation.
• Check if the time period given to the seller to respond to the offer, as well as the desired dates to sign the deed of sale at the notary and to take possession of the premises, meet the buyer’s needs.

During negotiations of the promise to purchase

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

Promise to purchase refused

Even if the offer meets all the seller’s conditions, the latter can refuse it. What's more, the absence of a reply from the seller is equivalent to a refusal on his part. If the buyer is still interested in the property, nothing prevents him from presenting a new Promise to purchase to the seller.

Promise to purchase accepted

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

Counter-proposal

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

It is important to remember that any new counter-proposal cancels out any previous ones. The broker must therefore record all the desired conditions in the last counter-proposal, in addition to those in the initial promise to purchase, as this is what will constitute the formal commitment between the parties.

To modify the terms of a promise to purchase that was already accepted by the parties, the broker will need to use the Amendments form to record the agreement between the seller and the buyer..

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 by the buyer and the time it is presented to the seller. Once the seller has received the Promise to purchase, the buyer is bound by the content of his 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. However, the latter may claim up to 0.5% of the agreed selling price. For example, for a property of $300,000, this represents an amount of up to $1,500.

Brokers' obligations regarding the drafting and presentation of any promise to purchase 

The seller’s broker

In accordance with clause 9.1 (2) of the brokerage contract to sell he signed, the seller’s broker must “submit to the seller, as soon as possible, any written promise received regarding the purchase, lease or exchange of the immovable.” If an unrepresented buyer asks him to do so, he must draft a promise to purchase, even if the price offered is significantly lower than the market value or the seller's asking price and present it to the seller.

The buyer’s broker

Similarly, under clause 8.1 (2) of the brokerage contract to purchase form, the buyer's broker must “submit, as soon as possible, any written promise received regarding the purchase, lease or exchange of the immovable.”

The broker must advise the buyer on the price to be offered for the property and its consequences, but he cannot breach his contractual obligations by failing to draft a promise to purchase under the pretext that the price offered is significantly lower than the seller's asking price. 

For any questions about real estate brokerage, Info OACIQ agents are available to answer them.