What constitutes a Promise to Purchase?
The Promise to Purchase is addressed by the potential buyer of the property to the seller of the property, following a conclusive visit that makes him/her want to purchase the property.
The Promise to Purchase is one of the important documents in a real estate transaction that serves to protect the buyer. In other words, the Promise to Purchase is a pre-contract since it does not constitute the official contract between the seller and the buyer. In fact, the deed of sale is the official and irrevocable document binding the two parties in the real estate transaction.
However the Promise to Purchase is nonetheless of great importance since it constitutes a formal commitment between the seller and the buyer. In fact, the seller undertakes to write down everything he knows about his property, while the buyer ensures, for example, that he has the financial means to purchase the property.
It is also in this document that you will inform the seller that you are inclined to purchase their property, as well as the conditions under which you wish to do so.
The different parts of a Promise to Purchase
The clearer and more detailed the Promise to Purchase, the less open to interpretation. Here is some of the information it should contain:
For information purposes, we have used a Promise to Purchase (PTP) for a primarily residential building with less than 5 units excluding condominiums.
1. Identification of the parties
In a residential property transaction, both parties (buyers and sellers) need to know their identities. This is the first section of the AP. On the left is the identification section for buyers, and on the right for sellers.
2. Purpose of the promise to purchase
This section contains the identity of the real estate broker representing the buyer, as well as his/her license number and the real estate agency he/she works for, if applicable.
3. Brief description of the building
4. Price and deposit
5. Payment method
You must now enter your payment details. If you left a down payment in section 4.3, you will need to re-enter it in section 5.1.
The total amount indicated in sections 5.1 (if applicable) and 5.2 represents your down payment.
6. New mortgage
If you are proceeding with a mortgage, you must indicate the details in this section: the amount, the conditions and the deadline for obtaining financing.
Please read clause 6.3 carefully.
7. Buyer's declarations and obligations
The seventh part of the AP concerns the buyer’s declaration and obligations. In addition, if the buyer is related to the agency or broker representing him/her, this is the place to declare it.
8. Inspection by a person appointed by the buyer
Clause 8 is where you indicate whether you wish to have the building or property in question inspected. Be aware that an offer to purchase may be cancelled following the inspection.
9. Examination of documents by the buyer
When you use a real estate broker, he or she can send you all the documents related to the sale of the property available on the Centris platform. When you write your promise to purchase, if all the documents you need are available online and you’re satisfied, you don’t need to fill in this clause.
10. Declarations and obligations of the seller
The 10th section deals with the seller’s obligations to the buyer in the transaction.
11. Declarations and obligations common to both buyer and seller
The 11th section deals with obligations common to both buyers and sellers, particularly in relation to the date of the deed of sale, including the day on which the buyer becomes the owner of the property, the date of occupancy of the premises, allocations, payments and inclusions and exclusions of property.
Don’t hesitate to ask your real estate broker any questions you may have before signing the Promesse d’achat. Also check that all conditions are included, as well as possession and notary dates.
12. Other declarations and conditions
This is where you can indicate any general conditions you’d like to add to your Promise to Purchase.
Common examples would be, a notice of non-renewal of a tenant’s lease while the property is rented, the repair of a non-functional included item, etc.
13. Annexes
When there are annexes to be attached to the promise to purchase, you must indicate them here.
For example, if you are financing the purchase of your property, you must complete the financing schedule (AF).
14. Acceptance conditions
This is where you tell the seller how much time he has to respond to your offer.
We invite you to respect any deadlines requested by the seller.
15. Interpretation
16.Signatures
Once you’ve gone through your promise to purchase with your real estate broker, and included all your conditions, this is where you sign!
You’ll also find a section for the seller’s response. This will indicate whether he accepts or refuses the promise to purchase.
What should the seller do once he has received a promise to purchase?
Offer accepted
Offer refused
Even if your offer satisfies all the seller’s conditions, the seller may refuse your promise to purchase. If you’re interested in the property, there’s nothing to stop you from proposing a new P.O.P. to the seller.
Counter-proposal
What if the seller receives several APs?
If the seller receives several offers to purchase, the broker representing the buyers must present all the offers received within a reasonable time of their receipt, without preference (for example, the broker cannot present the highest offers first, without considering their order of receipt).
The listing broker (i.e. the seller’s broker) must then present all the Promises to Purchase received to his client, and advise him so that the latter is in a position to make the most judicious decision possible according to his needs and expectations, and/or to make a counter-offer to one of the potential buyers.
Can I withdraw from a Promise to Purchase?
If all the conditions of your POA are met, your commitment to the seller is irrevocable. However, if one of the conditions mentioned in your Promise to Purchase cannot be fulfilled (e.g. financing), your POA will be null and void.
Different types of AP
It’s also important to note that there are different Promise to Purchase formats, depending on the type of property you wish to acquire. In fact, these differences in content are designed to accentuate the particularities of existing housing types. That’s why it’s important to ensure that your real estate broker sends you the right document when you make an offer to purchase.
1.Promise to purchase (PTP) | Mainly residential building with fewer than 5 units, excluding condominiums;
2.Promise to purchase (PTP) – Divided co-ownership | Fraction of a mainly residential building held in divided co-ownership;
3.Promise to purchase (PTP) – Undivided co-ownership | Share of a primarily residential property held in undivided co-ownership.
