Many home buyers do not clearly understand the legal implications of signing an Offer to Purchase. This column addresses the events that may occur once both purchaser and vendor sign the offer.

Generally speaking, once an Offer to Purchase (the Agreement) is accepted and the purchaser provides a deposit, all parties to the Agreement are bound by the terms of the Agreement and must close the transaction.

An exception to this occurs when there are conditions in the Agreement that must be satisfied prior to it becoming firm and binding. Typical conditions include the securing of financing, the sale of the purchaser’s current residence or the provision of a satisfactory inspection report. Only when these conditions are satisfied does the Agreement become firm and binding. If any conditions are not satisfied, the Agreement ends and the deposit is returned to the purchaser.

Most offers are not signed at the first presentation. There may be certain items that either the purchaser or the vendor will want to change. The most common item that may change is the purchase price. Once an item in an offer has changed, the offer must be accepted by the opposite party or it ends. By changing the offer and sending it to the opposite party, the purchaser has made what is known as a counter-offer. This process of sending offers back and forth can occur many times before all parties finally accept an offer.

Additionally, both parties should pay special attention to certain deadlines within the offer. The first is the time period within which a vendor may accept the Offer to Purchase. If this deadline is missed, the offer expires automatically depending on the wording used. If the purchaser makes changes, he or she will need to add a deadline by which his or her counter-offer is to be accepted.

The second date to look out for in the offer is the proposed closing date. If you are the purchaser, you must decide if the date is practical--do you want a quick closing or a long one? Finally, you need to consider the time within which the opposite party has to satisfy any conditions in the offer. If you feel the conditional period is too long, you may want to amend the offer and shorten this time period.

If you are the vendor and the purchaser has delivered an Offer to Purchase with conditions, you may want to consider adding a clause to your counter-offer stating that in the event that a second offer is presented to you during the conditional period, you will advise the first potential purchaser of the second offer. The first purchaser then has the option of waiving the conditions that have not been satisfied, thus making the offer firm and binding or cancelling the deal entirely. By adding this clause, you protect yourself from being forced to reject other offers simply because you are awaiting the satisfaction of certain conditions which could possibly never be satisfied.

There are several items that also should be reviewed such as the chattels and fixtures to be included in the transaction, the purchase price, the deposit amount and the closing date.

Finally, as the purchaser or vendor, you must be sure to carefully read, understand and agree with every clause in the offer before signing. It is strongly recommended that you engage the services of an experienced real estate agent and real estate lawyer prior to signing the Offer to Purchase.