Making the decision to move ahead with placing an offer on your dream home can be a very exciting moment. It’s important to take the time to consider what conditions should be placed in the offer to ensure you are protected against any unforeseen circumstances. In real estate, the offer to purchase is not considered “firm and final” until the conditions are waived. Conditions typically have an expiry day of 3 to 10 days, meaning if the buyer or seller does not fulfill said conditions, the contract becomes null and void. This gives the buyer the opportunity to make sure, through additional steps, that the property meets their expectations. If not, further negotiation can occur or they buyer may choose to walk away from the deal. Every offer requires careful consideration when it comes to the conditions required, but there are some that are almost always included, and for good reason.
Most real estate offers involve the following conditions:
1. The buyer needs to obtain financing in order to commit to the purchase.
Unless you are paying for your home purchase in cash, this condition is almost a must. There are many instances in today’s real estate market where buyers are pressured to exclude this condition in a multiple offer situation, in order to make their offer more attractive to sellers, but unless you are 100% sure you will get the financing it’s not a good idea to exclude this from your offer. Most buyers have the misconception that a mortgage pre-approval is a guarantee that they will receive the funds; this can’t be further from the truth. There are still conditions that need to be met from the lenders point of view before the mortgage approval is granted. The lender may require that an appraisal is done to ensure the value of the property is equal or greater than the value that the buyer has agreed to pay for it. It is also possible that maybe your debt has increased between the time of pre-approval and actually making the offer. This would affect your debt ratios and possibly affect your maximum qualifying amount. For these reasons, and possibly others, it’s definitely wise to include this condition because if you commit to purchasing the home and find out later you aren’t approved for a mortgage of that amount, you put yourself at risk and you may walk into a legal disaster.
2. The buyer requires a completed home inspection report, and needs to be satisfied of the results of that report.
As a buyer, you don’t have enough time during a showing to check all aspects of the home to ensure it is in good form, and in most cases you don’t know what to look for. As a result, placing a home inspection condition in the offer allows you the opportunity to return with a qualified home inspector and carefully examine the home structure and systems, to make sure they satisfy your expectations. If you find out that there are serious foundation flaws or other system failures in the property after making the offer, you cannot walk away from the deal legally if this condition was excluded from your offer. This can lead to major unexpected costs that you weren’t planning on having. You do not want to be surprised after moving in, so placing the home inspection condition in the offer helps to protect you against this potentially dangerous situation.
3. The buyer requires their home to be sold before committing to the new home purchase.
Most buyers do not have the luxury of being able to float two mortgages if their home doesn’t sell in time. Placing the sale of your home condition in the offer helps to protect you against this potentially crippling situation. In fact, your mortgage approval may even be riding on the fact that you need your home sold to acquire the new mortgage. Many Realtors may advise you that a seller is likely not to accept your offer with this condition present, and it may be true, depending on the type of market you are in, but you need to consider all your options and protect yourself from such disasters. Read our article on “Buy first or sell first?” to get tips and insight into which route may be the best for you. If it’s a necessity, be sure to include this condition.
4. The buyer needs to be satisfied of the details in the Status Certificate.
This condition comes into play when purchasing a condominium. Condo corporations are legally obligated to keep this report up to date and available to their owners. The status certificate provides valuable information such as, but not limited to: the financial status of the condo corporation, whether major work is needed to be done, the amount of reserve fund and whether there is enough to do any major work needed, outlines any claims made against the condo corporation. These are all important to know, because if there are any issues with these items listed, the corporation can either increase the common expenses or levy a special assessment against the unit owners. Further understanding of condo fees and related material can be found in our article “Condo fees. Are you wasting your money?”
Have your Realtor discuss with you all the necessary conditions for your offer as buyers’ and properties each have their own unique circumstances. Protecting yourself from any legal disasters is important and should be a priority. Try not to expose yourself by excluding conditions that may get you into hot water. If you lose a home to another offer because you included these conditions, just remember why you included them in the first place. Don’t blame your Realtor for the loss because it’s more than likely you chose a good one based on the fact they advised you to include these conditions so that you are protected.
Sutton Group – Select Realty Inc.
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