Omitting the finance (and all other conditions)

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pippidee
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Omitting the finance (and all other conditions)

Post by pippidee » 30 Nov 2016 23:23

Hello,

I am currently going through the cycle of offering on homes and being denied due to the finance condition. My realtor says that in order to be competitive, this clause needs to be gone. Of course, she wants a purchase a done deal so she can get us off her back. However, I am extremely hesitant due to the financial risk this poses for me. Pre-approval is not final approval, and final approval is conditional on appraisal, and any other factors the company decides between now and closing. My realtor says I should get independent legal advice to put my mind at rest (yet I told her I highly doubt a lawyer will endorse this plan because it is stupid and rife with risk). She also said that if I get a written guarantee from the bank (RBC) that I will be approved the mortgage as discussed, then I will be covered, which I don't believe RBC will agree to do (since the appraisal has not been done)

So, with the market being what is it currently, what are your opinions/experiences with omitting this clause and going condition free?

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Peculiar_Investor
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Re: Omitting the finance (and all other conditions)

Post by Peculiar_Investor » 01 Dec 2016 00:13

Welcome to FWF. I'm going to guess you are in the GTA or Greater Vancouver area, but it would be helpful if you could confirm.
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Insomniac
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Re: Omitting the finance (and all other conditions)

Post by Insomniac » 01 Dec 2016 00:19

I think you already answered your own question. I would never put in an offer without "subject to financing" and "subject to home inspection". You have to be firm with realtors. Remind them they are working for you.

Getting approval at your bank or credit union for the mortgage before you go shopping is good as it gives you an idea of how much you can afford to spend.

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Re: Omitting the finance (and all other conditions)

Post by BRIAN5000 » 01 Dec 2016 00:35

So, with the market being what is it currently, what are your opinions/experiences with omitting this clause and going condition free?
Back in 1981 when trying to buy my first house I was faced with the same problem.Houses were going up faster then I could save. My temperament wouldn't allow me to offer more than asking or remove subjects. Tried a few and decided that if I had to deal in a market like that I wasn't going to own a home, maybe I didn't want it bad enough. Very shortly after that the market changed, it dropped and the irrational over bidding ended and I was able to take my time and buy. I try to keep an eye on the market and the Vancouver market,it seems to me, has slowed down some.
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little bit longer and wish you would’ve sold early - this is just part of the game.” - Frank Zorilla via Abnormal Returns

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Re: Omitting the finance (and all other conditions)

Post by Descartes » 01 Dec 2016 12:24

I kind of side with your real estate agent.

If you are serious about the house then pay for the inspection before you make your offer.
You are going to be out that expense anyway if you backed out of your offer after the inspection.
AND that inspection will help you in justifying your offer to the seller.

You've been pre-approved up a certain amount already. The only reason the bank wants the final approval subject to appraisal is to stop you from stupidly massively overpaying for a hovel. If you did that then it would be difficult for them to get their money back upon foreclosure.
So.. Look at the comparables and ask for the last assessment made by the government for property tax purposes. These will help you gauge what a reasonable offer is and this is all the bank will do too.
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Re: Omitting the finance (and all other conditions)

Post by BRIAN5000 » 01 Dec 2016 13:08

Descartes wrote:I kind of side with your real estate agent
So.. Look at the comparables and ask for the last assessment made by the government for property tax purposes. These will help you gauge what a reasonable offer is and this is all the bank will do too.
When my wife was selling her condo ($210) a similar condo with an offer to purchase didn't close because TD bank refused to mortgage it because it was supposingly $2000 overpriced.Not much leeway in that situation.

A realtor will say and do almost anything to get a clean contract or a deal closed or a listing. We just sold a lakefront property for way more ($100's of thousands) then other realtors we tried would even list it for. If your realtor would rather work with a client that will put in non-subject offers it might be time to find a new agent.
“Sometimes you are going to sell early and wish you would’ve held on, other times you will hold on a
little bit longer and wish you would’ve sold early - this is just part of the game.” - Frank Zorilla via Abnormal Returns

pippidee
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Re: Omitting the finance (and all other conditions)

Post by pippidee » 01 Dec 2016 14:10

Thanks all! I am in Peterborough, which is starting to get hot due to.lack of demand and Toronto bargain hunters. I spoke with a lawyer who said the financing could be send for other reasons too. She has a client who is currently denied financing on her condition free purchase contract because the appraiser noticed drywall containing asbestos in the home.

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Re: Omitting the finance (and all other conditions)

Post by kcowan » 01 Dec 2016 14:16

Conditional clauses are just an option to walk. That is why realtors hate them. The most common ones are financing and sale of your existing property. Only one conditional offer can be accepted.

We have never made a conditional offer and we have purchased 5 houses. This does not mean it is recommended. Safe is better than bankrupt.
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Re: Omitting the finance (and all other conditions)

Post by patriot1 » 02 Dec 2016 09:23

Insomniac wrote:Remind them they are working for you.
Both the buyer's and seller's agents are paid by the seller upon a sale. I think in the case of an offer that falls through they may be entitled to some of the deposit. So who are they really working for?

I think that fact that people are making subject-free offers in a place like Peterborough is more than a red flag, it's a whole Red Army band.

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