Canadians Making an Offer – Guide

Finding a home is half the battle, Now comes the business part of Real Estate and having to make an offer to buy that home.

Oral promises are not legally enforceable when it comes to the sale of real estate. Therefore, you need to enter into a written contract, which starts with your written proposal. This proposal not only specifies price, but all the terms and conditions of the purchase. For example, if the sellers said they’d help with $2,000 toward your closing costs, be sure that’s included in your written offer and in the final completed contract, or you won’t have grounds for collecting it later.

Realtors usually have a variety of standard forms (including Residential Purchase Agreements) that are kept up to date with the changing laws. When you use a Realtor these forms will be available to you. In addition, Realtor’s cover the questions that need to be answered during the process. In many states certain disclosure laws must be complied with by the seller, and the Realtor will ensure that this takes place.

What the offer contains

The purchase offer you submit, if accepted as it stands, will become a binding sales contract (known in some areas as a purchase agreement, earnest money agreement or deposit receipt). It’s important, therefore, that it contains all the items that will serve as a “blueprint for the final sale.” These purchase offer items include such things as:

  • Address and sometimes a legal description of the property
  • Sale price
  • Terms — for example, all cash or subject to your obtaining a mortgage for a given amount
  • Seller’s promise to provide clear title (ownership)
  • Target date for closing (the actual sale)
  • Amount of earnest money deposit accompanying the offer, and whether it’s a check, cash or promissory note, and how it’s to be returned to you if the offer is rejected — or kept as damages if you later back out for no good reason
  • Method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted (prorated) between buyer and seller
  • Provisions about who will pay for title insurance, survey, termite inspections and the like
  • Type of deed to be given
  • Other requirements specific to your state, which might include a chance for attorney review of the contract, disclosure of specific environmental hazards or other state-specific clauses
  • A provision that the buyer may make a last-minute walk-through inspection of the property just before the closing
  • A time limit (preferably short) after which the offer will expire
  • Contingencies, which are an extremely important matter and discussed in detail below


If your offer says “this offer is contingent upon (or subject to) a certain event,” you’re saying that you will only go through with the purchase if that event occurs. The following are two common contingencies contained in a purchase order:

    • The buyer obtaining specific financing from a lending institution. If the loan can’t be found, the buyer won’t be bound by the contract.
    • A satisfactory report by a home inspector “within 10 days (for example) after acceptance of the offer.” The seller must wait 10 days to see if the inspector submits a report that satisfies you. If not, the contract would become void. Again, make sure that all the details are nailed down in the written contract.


Earnest money

The earnest money is usually a personal check written by you and made out to the escrow company you have chosen. Upon acceptance of the contract by the seller, The earnest money check is then deposited with the Escrow company (“Opening Escrow”) and held until the deal closes or is cancelled.

The Importance of Being Earnest… Money

The larger the earnest money amount, the stronger the offer. In Arizona, earnest money of around 1% to 3% percent of the purchase price is common.

A buyer who offers earnest money significantly less than 1% is often interpreted by sellers as not being very serious about the purchase. Conversely, earnest money significantly more than 1% is often interpreted as a sign of a serious buyer.

The earnest money provides the seller a small… very small, assurance that if you, the buyer, breach the contract that the seller may be able to keep your earnest money. That is rare in my experience. I have never had a seller keep a buyer’s earnest money and I’ve never had a buyer lose their earnest money.

Buyers: the seller’s response to your offer

You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, that’s that, and the sellers could not later change their minds and hold you to it.

If the seller likes everything except the sale price, or the proposed closing date, or the basement pool table you want left with the property, you may receive a written counteroffer, with the changes the seller prefers. You are then free to accept or reject it or to even make your own counteroffer. For example, “We accept the counteroffer with the higher price, except that we still insist on having the pool table.”

Each time either party makes any change in the terms, the other side is free to accept or reject it, or counter again. The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side’s proposal.

Down Payment Amount

In the end, the seller will be paid in cash whether the money comes from the your bank account (the down payment) or from your lender and the new loan you just took out.

However, if a buyer plans to borrow 96.5% of the purchase price it will raise a red flag to the seller. The seller should be worried about what will happen if the buyer can not ultimately borrow the money. If the buyer can’t get a loan as described in the contract, the buyer can terminate the contract and receive back all his earnest money. The seller’s fear is that while the home is off the market, the seller could miss out on another offer from another buyer.

An all cash offer combined with a quick close (let’s say, three weeks) can make a very strong offer, IF the seller wants to close quickly. If the seller doesn’t want to close quickly, a quick-close, all cash offer is of little or no benefit in negotiations with that seller.

Be careful: If you as a buyer promise in the contract to put cash down at closing (down payment) but then it turns out that you cannot close because you don’t have the promised cash, you could very well lose you earnest money to the seller.

Arizona’s Loan Status Report

Arizona has an unusual feature in our contract. We don’t normally use pre-approval or pre-qualification letters from lenders to judge a buyer’s ability to borrow the money as stated on the offer.

In Arizona, we have a special form called a Loan Status Report. The report gives the seller more detailed information about where the buyer stands in getting approval for a loan.

The Loan Status Report is prepared by your lender and a copy should be sent to your Realtor after both you and your loan officer have signed it. Your Realtor will include a copy of the Loan Status Report when submitting your purchase offer.

The Loan Status Report is another reason why you should contact a lender before shopping for homes. If you are paying cash, you will often times need to show bank statements or some sort of proof that you have the funds.

Closing Date

In Arizona, it’s common for the closing date to be about a month to 45 days after an offer is made. That is, if you make an offer on January 1, you might put in the offer that the closing date will be February 1 or February 15. However, closings longer than 45 days are not uncommon.

The processing of your loan by your lender is usually the item that takes the longest to complete.

Be careful: Buyers should be aware that you are responsible for having the loan ready by the closing date agreed to in the contract. If your loan is not ready at closing because your lender is incompetent or because your didn’t give your lender the paperwork he needed on time, then you, the buyer, could end up in breach of contract and at risk of losing your earnest money.

The morals are, 1) Choose a reliable Arizona lender 2) When your lender asks you for any documents, get those documents back to the lender as soon as possible, and 3) Ask your lender how long he will need to process your loan before you and your Realtor write an offer.

Personal Property Included

Is the refrigerator part of the house or is the refrigerator the seller’s personal property like furniture? How about the stove? Flat Screen TV’s? The drapes?

The AAR Residential Resale Purchase Contract (the “contract”) on lines 28 to 39 gives many examples of items that are part of the house, also called “fixtures.” These items are included in the sale unless specifically excluded elsewhere in the contract.

In Arizona, the refrigerator, washer and dryer are not usually considered part of the house. It is very common, however, for a buyer to state in an offer that the refrigerator, washer and dryer will indeed be included in the sale. If the seller does not want to include those items in the sale, he may want to make a counter offer that says those items are not included in the sale and have the buyer approve it.

A big problem today is confusion over large expensive, flat panel televisions. If a television is just plugged into an outlet and placed in an entertainment center, it is clearly personal property and not part of the house. However, if that same television is attached to the wall, it is considered to be part of the house and therefore included in the sale.

In Arizona, the stove/oven, dishwasher and draperies are considered to be included in the sale unless otherwise stated in the contract.

Seller Contribution to Buyer Expenses

It is not uncommon for buyer’s to ask sellers to pay for some of the buyer’s closing costs. This has the effect of reducing the offer price. So take that into consideration.

Escrow Company

The buyer selects the escrow company. I recommend buyers choose a company that has an established relationship with their Realtor.

Home Warranty

Seller’s in Arizona will often agree to pay for a 12-month home warranty for the buyer, so you should ask for it. A home warranty will cover different items depending on the warranty company used and the specific warranty purchased. Major items like the air conditioner are almost always covered. Home warranty companies typically charge the buyer a flat trip charge of about $50 to $70 per warranty service performed.

Additional Terms

This is where you might add custom clauses such as, “Seller to remove shed in backyard before close of escrow.”

Offer Expiration

It is not uncommon for offers to be valid for only about 24 hours.

Counter Offers

After the buyer summits an offer to the seller (in fact, it will be the buyer’s Realtor submitting the buyer’s offer to the seller’s Realtor), the seller may accept the offer in which case the buyer and seller have a fully executed, valid contract. On the other hand, the seller may reject the offer outright and the negotiations may be over.

Or, the seller may make a counter offer. Counter offers typically propose changing the sales price but they can attempt to change anything in the offer, such as the closing date or personal property included in the sale.

For example, if the buyer’s original offer included the refrigerator, washer and dryer, the seller’s counter offer might simply say, “Refrigerator, washer and dryer not included.”

The buyer could accept that counter offer in which case the buyer and seller have a fully execute, valid contract. On the other hand, the buyer may reject Counter Offer #1 outright in which case the negotiations may be over.

Or, the buyer could write Counter Offer #2, (“Washer and dryer to be included”) and so on until agreement is reached or the negotiations fail.

If the negotiations succeed, the original offer and all counter offers become part of the purchase contract.

Once an agreement is reached, your Realtor will take the purchase contract, all counter offers and the earnest money check to the escrow company to “open escrow.”

Escrow companies are private companies that act as neutral third party intermediaries. They represent the buyer and seller equally but their real “boss” is the contract. They look to the contract for their instructions.

Escrow companies also sell title insurance.