The real cost of unconditional offers ...

by Olivia D'Orazio22 Sep 2014
The tightest market in years means selling agents are now seeing more and more no-condition offers thrust before clients, but too few are viewing those offers as the red flags they are, caution agents.

“If [the buyer] waives that condition and [that] client doesn’t get financing, [the property] sits on the market until closing with no one viewing it,” Eric Chan, an industry vet with Century 21 tells REP. “Then you have to release the funds and relist. Your property price is going to drop as well.”

Inventory challenges are encouraging buyers to adopt aggressive bidding tactics, especially in large Canadian markets. Removing both inspection and financing conditions are increasingly common, say industry veterans, pointing to something unheard of even two years ago.

But banks are tightening their purse strings and securing financing might be more difficult than many homebuyers believe. Without doing due diligence, or at the persuasion of a Realtor, buyers are waiving the condition of financing, unaware that the move could complicate the deal, put the property in limbo, and end in a mutual dissolve.

Chan says mortgage lenders are particularly wary of certain properties – especially those with structural issues – and aren’t as quick to hand out mortgages as they once were. Homebuyers are learning that it takes more than a good credit score to secure a loan for these types of homes.

“People can’t come up with a 20 per cent deposit so [the mortgage] needs to be approved by CMHC,” he says. “And if [CMHC] says no to it, the banks will say no to it as well.”

Instead, Chan says agents should request proof that a mortgage broker has secured approval against the property that a client intends to bid on and for the amount that the client intends to offer.

“You have to do it right the first time,” he says. “It looks good, everything gets waived, but then financing is falling through.”


  • by Larry 9/25/2014 1:23:24 PM

    As a full-time Realtor I ALWAYS put 2 conditions (Fin & Insp) in my offers regardless of what my clients tell me. When i was younger my dad would said to me "those that know better must always do better" As Realtors we are the calm voice/head when our clients are excited and can't think clearly. They are our investment.

  • by Dick B 9/25/2014 2:27:29 PM

    Adding to Larry's reply, I think in addition to Financing and Inspection conditions, one should ensure Insurance approval. More and more Insurance companies are questioning "fused" electrical panels, aluminum wiring, shingle conditions etc. Except perhaps on homes less than 10 years, this condition should be added.

  • by Marguerite 9/25/2014 3:44:48 PM

    There's another issue to be addressed. The potential for a lawsuit launched by the Sellers against the Buyers and their agent for untold thousands of dollars re reduced price, aggravated stress, bridging to cover a Seller's commitment to purchase another home based on a firm deal on theirs ...the list is endless and subject to the imagination & creativity of a lawyer.

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