Once you find a house you want to buy, you have to tell the vendor that you want to buy it and how much you're willing to pay for it. You do this by making an offer to purchase.
By law, an agreement to buy and sell has to be in writing. Your real estate agent will draw up the offer as either an "Offer to Purchase" or "Agreement of Purchase and Sale".
The agent will fill in the names of the purchaser, the vendor and the real estate agents, the address and lot size of the property, the purchase price and deposit you're offering, a list of any items you'd like included in the purchase price (such as appliances, rugs or drapes), the date by which the vendor must respond to your offer, the date by which your lawyer's investigation of the property must be completed, and the date on which you'd like the deal to be completed (the closing date).
You may also want to say in your offer that you'd like to assume (take over) a mortgage presently on the property or that you'd like the vendor to finance the sale by taking back a mortgage from you. Before you sign the offer, it's a good idea to have it reviewed by a lawyer. Once you've signed, your real estate agent will present it to the vendor, together with a cheque for the deposit.
The vendor has the right to reject your offer, sign back a counter-offer, or accept your offer. If the vendor rejects the offer, you can either make another offer or walk away and start looking for another house. If the vendor sends the offer back to you with changes, the means the vendor is making a counter-offer. You can accept the vendor's counter-offer, or reject it, or make a counter-offer of your own.
If the vendor accepts your offer, or if you accept the vendor's counter-offer, you have a contract. The contract is known as an Agreement of Purchase and Sale.
When a purchaser and a vendor make an agreement of purchase and sale, the purchaser is promising to pay an agreed amount of money in return for ownership of the property, and the vendor is promising to transfer ownership.
Entering into an agreement of purchase and sale does not make the purchaser the owner. The actual transfer of ownership and payment of money take place later, on the closing date. However, even though ownership of the property doesn't change hands until closing, the agreement of purchase and sale is a binding contract.
The purchaser has a legal obligation to pay the promised amount of money and the vendor has a legal obligation to transfer ownership. If either one decides not to go through with the deal, the other can sue.
We told you above about the matters that your real estate agent will write into the offer. What your agent writes only takes up a small amount of space on the Agreement of Purchase and Sale. The document is printed on legal size paper (8 ½ x 14") and it's covered from top to bottom on both sides in small print.
If you get out your magnifying glass and actually read the small print, you'll see that it's full of words and expressions that only a lawyer will understand. Nevertheless, when the purchaser and vendor have both signed the document, they're not only legally bound to pay the purchase price and transfer ownership, they're also legally bound to do all the things and keep all the promises that are written in the small print.