The Real Estate Sales Contract

The Real Estate Sales Contract, also known as the Agreement of Purchase and Sale, is a legally binding document that clearly outlines precisely what the seller will deliver to you at closing. It also allows you to outline in detail conditions you wish to have fulfilled (such as a satisfactory home inspection, approved financing and/or the sale of your existing home) in order to close.

Because these agreements are legally binding, read yours carefully to ensure all agreed-upon items are included. Most importantly, have your lawyer or notary review the document before you sign it.

Contracts for resale homes typically follow a standard, provincially-approved format (which a lawyer or notary may modify to accommodate certain stipulations). New home builders, on the other hand, do not follow a standard format for their contracts. Click on the links below to understand what's included in each:

	Resale Agreement of Purchase and Sale
	Builder's New Sales Contract

Resale Agreement of Purchase and Sale

The main components of a resale Agreement of Purchase and Sale include:

• Legal description of the property, including all easements (any permitted access or use of the land by others, including utility rights-of-way).
• Purchase price agreed to by you and the seller, including your deposit. (The deposit may be deducted from the purchase price at closing.)
• Chattels, fixtures and rentals. Chattels are all items included in the purchase price that may not have been at first included (appliances, window coverings, etc.). Fixtures are excluded items that are attached to the property (chandeliers, mirrors, etc.). Rentals are not part of the purchase price because they are items being rented (alarm systems, hot water tanks and water softeners may be rentals). Learn more about chattels and fixtures on the Listing Agreement page under Selling Your Home.
• Critical dates and times. The first is the timeframe the seller has to consider your offer. If the seller does not accept within that time, then the contract is not binding. The second is the closing and possession date by which the seller must vacate the property and you assume ownership. (The possession date is usually the same as your closing date, but there can be exceptions.)
• Goods and Services Tax/Harmonized Sales Tax (GST/HST) New Housing Rebate. If GST is applicable, the contract outlines how it is to be paid.
• Title. The contract will state that you are entitled to a good title free from encumbrances except for restrictive covenants as outlined within municipal agreements. The contract will also give your lawyer a timeframe in which to complete all necessary title checks and searches on the property.
• Inspection. The contract will state that you have had a chance to personally inspect the property and, unless otherwise stated, have declined the opportunity to have a home inspection completed on the property.
• Insurance. The seller must maintain fire insurance on the property until it has closed. If a fire occurs prior to closing, then you can choose not to buy the property or accept the property as is, along with any insurance money due.
• Adjustments. Charges specific to the property, such as property taxes and utilities, will be adjusted on closing day. In other words, the seller is responsible for these costs and their payment up to closing and you assume responsibility for payment of these items the day after closing. If the seller has prepaid certain costs (such as taxes and fuel), then monies for the unused portions will be credited at closing.

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Builder's New Sales Contract

Typically, a builder's contract has been developed by the builder's lawyer and has clauses and provisions to benefit the builder. Therefore, it is vital that your lawyer or notary review the document before you sign it.

A builder's contract will usually cover the items included in a resale contract (described above). However, the builder's contract often contains more details, including:

• Legal description of the property. This may include site maps, floor plans, artistic drawings of the home and elevations. The builder will describe specifically the materials and products that will be used in the construction of your home.
• Purchase price. This may only cover standard features. If the price is to include any upgrades, those upgrades should be clearly listed as part of the agreement. If not, amendments should be noted and signed by both parties as upgrades are added. The builder also will outline payment schedules and amounts due.
• Chattels, fixtures and rentals. Typically, the contract does not address these items. However, you should note what lighting (if any) is included as part of the purchase price. Some builders do not include lights, relying instead on the buyer to supply lights or purchase lights as part of the upgrades.
• Dates. The contract should specify start and completion dates. Sometimes the builder will outline his plan in case construction has not started by a specific date. Make sure you know up front what process is in place if a delay occurs and when/how you will be notified.
• GST/HST New Housing Rebate. While a new home is subject to GST/HST, a rebate usually applies. In most cases, the rebate is assigned to the builder-make sure you know up front if this is the case.
• Title. The contract will include any restrictions regarding what you can and cannot do on your property. Listed covenants may include any community or subdivision restrictions such as colour schemes you can choose for your home, types of trees that can be planted, location of satellite dishes, etc.
• Insurance. The builder should be responsible for all insurance on the property while under construction. Be very clear about your insurance responsibility.
• Selection choices. The contract will outline your choices for paint colours, cabinets, flooring, counters, etc. It will also state when you must make the selections and may stipulate that the builder has the right to make the choices on your behalf if you fail to do so on time.
• Other costs. Be sure you know up front what kinds of additional costs may be levied. These may include extra charges by the municipality, utility installation and hook-up, tree planting, etc.
• Deviation from plans. In all likelihood, you'll see a clause that describes the conditions under which the builder may make minor changes to your home-or substitute materials of equal or better quality-without prior notification to you. Make sure you and your builder clearly agree to what constitutes a "minor" change-something your builder considers "minor" may be "major" to you!
• Warranty. The contract should outline the builder's warranty for your home and state if your builder is registered with a new home warranty program.
• Completion. The contract may state that the home is deemed to be complete and will be transferred to your name even though some items are still outstanding. This usually occurs if some components can only be completed during specific seasons. The contract should make provisions for such cases, including whether you have the right to hold back funds.

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