Pros and Cons of Firm Offers in Real Estate

Published on 29 August 2022, 07:22:56 AM

You absolutely love the home, but that’s not reason enough to make firm offers in real estate.

Real estate prices in Ontario are high and competition for properties is intense. Home prices increase all the time, or so it seems. Before you seriously consider making firm offers in real estate, watch your actions aren’t motivated purely by emotions. 

When your feelings get the better of you, let Axess Law’s licensed real estate lawyers review your offer to purchase.

What Does It Mean When an Offer is Firm?

Ever see a home you just can’t resist? Emotional purchases are like that — spur of the moment, on the spot decisions.

A firm offer can give you a decided competitive “edge.” But think of the risks it creates. Without due diligence before you buy, you could be getting more than you bargained for.

Risks of a Firm Offer (Ontario)

If you’ve signed an agreement of purchase and sale and are now wondering what does a firm offer mean in real estate, here’s what to expect.

Pros of Firm Offers

• Your offer goes to the front of the queue. A generous deposit and firm offer trump other bidders with less upfront cash to commit. How to write offers in bidding wars. 

• Home inspection and mortgage financing subject-to clauses can delay or stop a real estate sale. With your firm offer in hand, the vendor makes a quick sale and moves on.

• Where they apply, new home warranties cover most things your contractor overlooked or left out. You can usually count on your Tarion warranty to guarantee your home is  acceptable and ready to move into. Making a firm offer may be less risky when you have a warranty to back it up.

• Firm offers close faster. Axess Law can finalize your sale quicker because you don’t have to wait for financing or other conditions to be satisfied. When school starts soon or you need to move for a job, making a firm offer gets the deal done.

Cons of Firm Offers

• In the heat of the moment, have you checked out what your new home is worth? Mortgage lenders only finance a home up to appraised value. You pay the difference between your offer and a property’s actual market value. 

• Pre-approved mortgages are only an offer, not a fait accompli. Your lender could approve you for less than you bid or not all, leaving you scrambling to close on time. Sellers don’t have to agree to extensions or return your deposit.

• Patent defects overlooked during your home tour can be forgivable. It’s easy, though vexing, to fix a few cracks here and there. On the other hand, carpenter ants gnawing away at the basement beams expose you to financial and legal liabilities.

• Latent defects are not easy to spot, even for experienced home inspectors. Leaving out a home inspection clause leaves you paying for major repairs your new home may need for your health or safety, like removing hazardous asbestos flooring or ceiling tiles. 

• Fire and floodplain insurers are reluctant to cover homes that pose extraordinary risks. Your premiums could go way up or you may be left having to sell yourself if a home has aluminum wiring, is next to a flood-prone area or is in “tornado alley.”

When to Make Firm Offers

Before you make a firm offer with no conditions, revisit a home you feel emotional about. The risks of making firm offers are serious and substantial. Our suggestion — only make a firm offer if:

• You have construction skills or are an experienced do-it-yourselfer.

• You can afford to fix potential defects.

• You understand the risks.

• You won’t require financing or can borrow from family if needed.

Understand your rights – buyer’s right to cancel.

Why You Need Legal Advice

When you sign an agreement of purchase and sale, you are making a legally binding offer you may not be able to back out of without a legal penalty. In fact, if you walk away from a firm real estate offer, you could be liable for the difference between your offer and what the next buyer pays. 

Avoiding Legal Costs

You may even be asked to pay the seller’s moving and storage costs if a decision to quit the contract results in extraordinary expenses the seller didn’t anticipate. See when a deal falls through who keeps the deposit. 

Withdrawing an Offer

Hiring a lawyer can help preserve your right to back out using a home inspection clause or if unfavorable financing make a real estate deal undesirable after all. Axess Law real estate lawyers near you review and recommend clauses that make your offer to purchase conditional. We explain real estate law in Ontario to help you understand your legal rights and obligations.See why the wording of home inspection clauses affects your rights.

Amending Contracts

We can amend your contract or negotiate with the seller’s lawyer to buy you more time to get financing. We ask the seller to pay for repairs you shouldn’t have to bear or reduce the selling price to allow you to fix defects a home inspection reveals.

Discharging a Mortgage in Ontario

Once your offer is accepted in writing, Axess Law’s real estate lawyers in Ontario liaise with your realtor and bank, credit union or private lender to discharge existing mortgages and finance your new home.

Property Title Searches

We search titles to your new property for any legal obstacles that could delay or prevent the sale. Your real estate transaction is completed just in time to give you the keys to your new home.

Do You Need a Lawyer for a Buyer’s Agreement?

You may have been asked to sign a binding exclusive buyer representation agreement (BRA) with a realtor. We prevent misunderstandings or potential conflicts of interest by reviewing the agreement, before or after you sign. Only a licensed Ontario lawyer can answer legal questions you may have. 

Affordable Real Estate Lawyers, Anywhere You Are 

Access lawyers for less in Greater Toronto Area, Ottawa, or anywhere in Ontario  when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it.

Book Virtual or In Person Appointments 

Axess Law lets you remote in by secure video call. Experienced virtual real estate lawyers are available day or evening, anywhere in Ontario. We meet online with you in the convenience of your home or office and, once we verify your identity, e-sign real estate closing documents by email.

Book online with our easy web form or call our 647-479-0118 lawyer line (toll free at 1-877-522-9377) to make appointments 7 days a week. Our real estate lawyers (Toronto, Greater Toronto Area, and Ottawa) meet with you at your convenience at Axess Law locations wherever you are.

We have onsite parking and easy transit access.