Purchase Price and Deposit

Deciding upon the purchase price for a pre-owned home will depend on a combination of factors; one of the most important is its location. The home’s location will have an impact on the value of the home both now and in the future. For example, suppose you were to choose between two homes – one that was on the middle of a quiet street and the other on a corner lot of a busy street. The house in the center of the quiet street may have a greater value. However, should you decide that you do not mind the traffic on the corner lot you may be able to reduce the offering price accordingly for the home. Further, a home located in a thriving and vibrant community may have more value than a home in an area where local businesses are failing, the roads are uncared for and the schools are on the decline.

Other factors that may play a role in the purchase price of a pre-owned home include the number of homes available, both in general and within that particular neighbourhood; the recent history and asking price of the other comparable homes in the area; unique selling features such as a pool or a fireplace; the general condition of the property and its surrounding area; the immediacy of your need to purchase and the vendor’s need to sell. In general, most vendors set their asking price higher than they’re actually willing to settle for, so be prepared to bargain. Check the business section of the newspaper for general information on the local housing market or discuss it with a realtor or your banker.

Before a final agreement is reached, you and the vendor will likely go through a series of negotiations over the price and/or other selling conditions. It is not uncommon for the vendor to respond to your preliminary offer with a counter offer, detailing specific changes. You, in turn, are free to either present your own counter offer or to withdraw your original offer entirely. This process continues until either an agreement is reached or one of the parties withdraws from the negotiations.

It is customary for the purchaser to make a deposit with the offer as evidence of good faith. While there is no rule on the amount to be submitted as a deposit, the amount is often viewed as a reflection of the seriousness of the purchaser. However, caution must be made for those considering a large deposit. If the owner accepts your offer and you later choose to cancel it, you stand to both forfeit your deposit and, depending on the circumstances, have legal action brought against you by the vendor.