Step 3 - Signing the sales agreement

You have just found the home of your dreams. It’s exactly what you were looking for and is within your budget. Now’s the time to draw up a sales agreement.

What it includes

The sales agreement is a document that is legally binding on the buyer and seller. On the document, one person offers to buy another person's property according to certain conditions.

It features the following information and conditions

  • Address and legal description
  • Amount of the deposit
  • Transaction closing date
  • Length of time the offer is valid (generally between 24 and 48 hours)
  • What is included in or excluded from the sales price
  • Approval of mortgage loan (conditional to purchase)
  • Satisfactory inspection of the premises by an expert (condition on the purchase)
  • Sale of your current home (if you are already a homeowner)
  • Any other condition(s) deemed appropriate

In most cases, the buyer's real estate broker will draw up the sales agreement and present it to the seller's real estate broker.

Offer and counter-offer

If the seller accepts the offer

Once the sales agreement is accepted, neither party can refuse to carry it out. Otherwise, the seller or buyer could be sued for damages caused to the other party. The buyer could even lose their deposit.

If the seller turns down the offer

They can make a counter-offer (on the transaction closing date, etc.), which you can then either accept or turn down. If you turn it down, you can make another counter offer.

Once the seller and buyer agree, the agreement is considered final, provided that all terms and conditions are met.

Inspection of the property

You need to make sure the property is in good condition by having it checked over by a building inspector. The inspection report may be included as one of the conditions in the sales agreement. A negative inspection report may be a negotiating tool for you, or could even make the sales agreement null and void.

Content of the inspection report

  • Foundation
  • Roof
  • Structural elements
  • Windows
  • Insulation
  • Plumbing
  • Electrical system

Tip

Make sure you hire an expert who is a member of the Ontario Association of Home Inspectors (OAHI) - External link. This link will open in a new window. so you can be sure of their skills and credibility.

Certificate of location

This document is prepared by a land surveyor and establishes the physical boundaries of a property. It is required by most mortgage lenders.

What it includes

  • Description of the lot and building
  • Illegalities and irregularities (e.g., a fence encroaching on a neighbour’s property)
  • Easements and specific bylaws or regulations that may restrict a property owner’s rights

If you buy an existing home, it’s usually the seller who must provide it to you. In the case of a new construction, the land surveyor will prepare this certificate.

Mortgage financing

Obtaining mortgage financing is often a condition in the sales agreement. Go to the next section of the guide to learn more.