Buyers hate surprises. Most of the time, the surprises that arise when purchasing a property are unfavourable, such as a lien, a faulty roof, or inadequate funds in the condominium reserve. These are all issues that are not readily observable or even apparent to the average buyer. However, these are all issues that can be mitigated by drafting a proper agreement of purchase and sale contract, limiting risk and by working with a good real estate lawyer.
The agreement of purchase and sale governs the transaction between the buyer and the seller, and as an agent, it’s our fiduciary duty to ensure our client’s interest is fully protected. Recently, one of our clients was looking to purchase their first condo and following status certificate review, it was discovered that a faulty piping system had been installed in the building and the cost to remediate could potentially be substantial. Because of the inclusion of the status certificate review as a condition in the contract, our client had the opportunity to review this issue with their lawyer, make the decision to terminate the agreement, and see their deposit cheque returned to them in full.
There are a number of critical purchase agreement clauses that my team uses to protect our buyers and save them money – Eight Critical Purchase Agreement Clauses.
1.Basic Financing Contingency
In the event that a loan is not approved, and the buyer is unable to purchase the property, having this condition in place allows for the buyer’s deposit to be retrieved in full.
2. Review of Status Certificate
The status certificate is a comprehensive document that outlines the financial and legal health of a condo corporation. Included in this document are the duties and rights of the condo corporation and of the individual owners; whether any special assessment exists on the unit or building to pay for such things as repairs, budget shortfalls or boosting the emergency reserve fund; as well as the current budget and a Reserve Fund Study that identifies future replacement or repair work.
To protect our clients from legally or financially risky condo buildings, our team always recommends the inclusion of a condition for the review of the status by a real estate lawyer – Why the Status Certificate Review Condition is Important. These professionals conduct a thorough review of the Status Certificate and offer their opinion on the health of the condo corporation, limiting risk and ensuring your investment decision is a sound one.
To give a buyer protection against defects in the building, it has become very standard to see the inclusion of a condition in the agreement of purchase and sale to make it conditional on the buyer conducting and being satisfied with the results of a building inspection – Home Inspection Before You Buy. By including an inspection as part of the conditions, a buyer can put the onus of the repairs on the seller before closing or make the necessary amendment to the offer price to reflect the value of the repair work needed.
By including such conditions in the contract, we prime our clients for the potential of undiscovered issues and allow them the time to conduct proper due diligence to uncover surprises, limiting risk in the long run. When our clients can move forward with a purchase in confidence knowing these conditions have been satisfied or waived, we’ve succeeded in our roles as agents.