Authority to Contract
To enter into a brokerage service agreement, agreement of purchase and sale, or other contractual arrangements, you must have the lawful capacity to enter into such contracts, (i.e, you must be the buyer or seller, or have a lawful power of attorney for the seller or buyer, or be the lawfully appointed executor of the deceased owner’s estate, etc.). If you do not have such authority, you may incur personal liability for misrepresenting your authority.
Verbal Contracts
Licensed real estate salespeople in Manitoba are obligated by provincial legislation to communicate all offers, counteroffers, withdrawals, and acceptances in writing. Having all such offers, acceptances, etc. in writing also helps to minimize the risk of misunderstandings and disappointments at a later date.
Offer to Purchase
In Manitoba, the government prescribes forms of offers to be used by real estate registrants in the purchase and sale of single-family residential houses and condominiums.
The offer to purchase (agreement of purchase and sale) is the standard form document used to set out the terms and conditions of a transaction – the contract between a buyer and seller.
As a potential buyer or seller, whether you are a client or customer, you should ask for a copy of this document early in the relationship so you can become familiar with its basic clauses. Familiarity with the clauses will help you:
- be better equipped to understand the process of negotiating a purchase or sale of a property;
- know what questions to ask your brokerage representative or your lawyer; and
- have a better appreciation for what is involved in the preparation of an offer or acceptance.
Offers, Counter Offers & Acceptances
When a buyer finds a property he/she wishes to purchase, it is customary for him/her to make an offer through the brokerage representative. The offer may be accepted by the seller or modified and returned to the buyer as a counteroffer. If the buyer receives a counteroffer, he/she may accept or reject it. If the buyer rejects the counteroffer, he/she must make a new offer to continue negotiations.
The exchange of offers and counter offers will continue until the buyer or the seller accepts the terms proposed by the other party or withdraws from the negotiations. Where buyers and sellers are working with brokerage representatives, the exchange of offers, counter offers, and acceptances is conducted through their representatives.
Buyers and sellers must understand that their brokerage representatives:
- cannot make or accept an offer on their behalf;
- are their representative to communicate and receive notice of offers, counter offers, and acceptances unless written instructions to the contrary have been given by the buyer or seller.
Keep in mind the following exceptions that may apply:
- an offer may generally be withdrawn by the buyer at any time before the seller’s acceptance of the offer has been communicated to the buyer;
- an acceptance of an offer or counteroffer may only be effective once the acceptance is communicated to the party who made the offer or counteroffer or to his/her duly authorized agent;
- an acceptance must be communicated in the manner specified and by the time prescribed, if any, in the offer or counter offer; and
- when an offer or counteroffer has been accepted, there is a binding contract between the buyer and seller, even though the contract may be subject to certain conditions that must be met (for example, the buyer being approved for a mortgage).
Multiple Offers
Sellers may receive multiple offers for their property, particularly in an active real estate market. Buyers and sellers should have an understanding of the process they may encounter if a multiple-offer situation arises.
While a seller’s brokerage representative must communicate all offers to the seller as they are received, there are no rules that govern the order in which the seller must respond to multiple offers. The seller is not obligated to accept the highest offer. The seller decides which offer to accept, which offer to counteroffer, or if all offers should be rejected.
In Manitoba, it is a rule imposed on salespersons that listing agents inform buyers (through their agent) when they are in a competing offer situation without disclosure of the terms of any of the competing offers, either directly or by implication. The intention of this rule is to allow buyers the opportunity to make an informed decision as to whether or not to make any amendment to the offer to purchase. Likewise, if circumstances arise where the buyers are no longer in competition with another buyer, the buyer is to be advised of that fact.
Members of the public can expect that when they deal with a real estate registrant in Manitoba, the contents of any offer to purchase that they are a party to will be treated with utmost confidence.
It is also acceptable for a seller, through his/her listing agent, to seek clarification of the buyer’s offer, and identify a “short list” of offers that he/she may choose to work with. At the conclusion (with an acceptance of one offer) buyers can expect that the seller/listing agent will provide his/her signatures on rejected offers, confirming that they have been considered. A buyer/buyer agent is also entitled to receive a list from the listing agent confirming the identities of the buyer agents (but never the identity of the buyer or the terms of those offers).
This is only a brief discussion of multiple offer protocols. For a more complete review of these policies which have been issued jointly by The Manitoba Securities Commission and Manitoba Real Estate Association, you can view the protocol at the MSC website as follows: www.msc.gov.mb.ca/real_estate/policies_legislation/policies/offers_dir.html.
Conditional Offers
In the purchase of the real estate, buyers may want additional information and clarification to learn more about the condition of the property and to identify major defects as well as to ensure that the information given, and representations made, by the seller are in fact accurate. A prudent buyer should consider an inspection from a qualified individual.
Your real estate salesperson can write conditions in your offer to purchase to allow sufficient time to complete the requested inspections. It is understood that in most instances the buyer is responsible to pay any costs associated with inspections and reports. The following list is not all-inclusive but includes the more common reports or inspections usually requested:
- obtaining a home inspection to your satisfaction;
- obtaining an engineering inspection to your satisfaction;
- securing satisfactory financing;
- receiving approval from a third party to the transaction (e.g. a parent, lawyer, employer, etc.);
- having the seller complete a Seller’s Voluntary Property Condition Statement to your satisfaction;
- obtaining satisfactory tests for well water and septic system;
- inspection of wood burning device and confirmation of satisfactory insurance coverage;
- selling their current property
Copyright (C) 2014 MREA – Manitoba Real Estate Association
