The promise to purchase is the document with which a buyer offers to purchase a property under specific conditions.
But did you know that it’s a legally binding agreement? The seller could even initiate proceedings against you if you decide not to honour this promise to purchase. It’s therefore essential that you fully understand what you’re signing.
The Promise to Purchase’s Essential Elements
Thankfully, you have your broker by your side!
Your broker will prepare the promise to purchase and make certain you understand every aspect of it before asking you to sign.
The promise to purchase contains the following key particulars:
- Each party’s identifying information: both the seller’s and buyer’s name and address.
- A description of the property: the property’s full address and a detailed description.
- The proposed purchase price: the amount the buyer is willing to pay.
- The offer’s deadline: how long the seller has to accept or refuse the offer.
- Specific conditions and clauses: pre-purchase inspection, securing financing, absence of hidden defects, for example.
- Possession date: the date on which the buyer can occupy the property.
- The deposit (if applicable): a sum paid as a guarantee to demonstrate the buyer’s seriousness.
- The date of the property visit: which formalizes the moment when the buyer confirmed they were satisfied with the property’s condition.
- Each party’s signature: both the buyer’s and the seller’s signature once the purchase offer has been accepted.
Possible Counter-Offers
When the seller receives your promise to purchase, they can either accept it in its current form or make a counter-offer, changing the price, inclusions, etc.
You may, in turn, refuse the counter-offer and propose something else. You and the seller may go back and forth exchanging counter-offers several times before you both come to an agreement, but this is nothing to worry about!
At What Point Does the Promise to Purchase Become Binding?
As soon as the buyer signs it, even before it’s presented to the seller. From that moment on, the buyer is held to the conditions stipulated in the promise to purchase.
Nevertheless, the Civil Code of Québec grants the purchaser a very short withdrawal period: between the time they sign the promise to purchase and the time it reaches the seller. However, once the promise to purchase is in the seller’s hands, the buyer is legally obligated to comply with the terms of their offer, subject to the conditions set out therein.
The Important Role Conditions Play in the Promise to Purchase
Indeed, the conditions set out in the promise to purchase protect the buyer and allow them to withdraw their offer if certain requirements aren’t met.
The most common conditions include:
- The purchase is conditional on inspection: If the pre-purchase inspection reveals any serious problems, the sale may be cancelled or new terms may be negotiated.
- The purchase is conditional on obtaining financing: Buyers needing a mortgage can’t proceed with the purchase without this approval; without it, the sale will be cancelled.
- The purchase is conditional on the sale of another property: A clause that allows the buyer to purchase the property on the condition that they sell another home first.
In the end, if all conditions are met, the buyer must honour their commitment, or they may be subject to financial penalties or legal action.
What Happens Once the Promise to Purchase Is Accepted?
Once the promise to purchase has been signed and accepted, only a few steps remain to complete the transaction:
- Having the building inspected: If the offer includes an inspection clause (highly recommended!), the buyer may hire a building inspector to assess the property’s condition.
- Obtaining financing: The buyer must secure their mortgage loan with their financial institution.
- Signing at the notary’s: When all the conditions have been satisfied, the transaction is finalized before a notary, who draws up the deed of sale and oversees the transfer of ownership. (See our article.)
Before signing the promise to purchase, make sure you fully understand the terms and conditions as well as your obligations as a buyer.
