Ann Smith
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Phone: 519-433-4331
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Fax: 519-433-6894Email: ansmith@sympatico.ca

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The Pros & Cons of Conditional Offers

By Ann Smith

Most sellers prefer a clean offer – one that is not tied up on condition that the buyer’s house sells, financing approval, or a home inspection.  So, whether you’re buying or selling, do your homework to eliminate the risk and uncertainty on both ends.

Pre-approved financing

If you’re looking to purchase a home, talk to your mortgage broker or bank first.  Find out exactly what you can afford. You may still have to include a contingency that the loan is finalized but showing the sellers you took the necessary steps to be pre-approved will go a long way to alleviate concerns. 

Ask your lender if there are any additional conditions that must be met before final approval. This could include things like providing the purchase contract, a home appraisal, or verification of financial documentation such as a copy of a gift letter for down payment or proof a credit card was paid down.  Review these conditions carefully before removing a financing contingency from the contract.

For sellers

If you accept an offer on condition that the buyer’s current house sells, include a release clause that allows you to continue to market your home.  If a better offer comes along, the buyers must firm the offer or risk losing the deal.  This usually includes a time period, often 72 hours.   But beware when conditional offers are in place, many Realtors bypass the home for showings.

For buyers

If you enter into a contingent deal, move quickly to find interim financing if you’re confident your house will sell. But take into account additional costs such as double mortgage payments and upkeep for two homes if it drags on.  Can you afford this for an extended period?  And don’t feel trapped into selling your current home at a lower price so you don’t lose out on the deal. 

Home inspections

Many purchasers make an offer to purchase on condition of a home inspection.  To remove this issue before it becomes a condition of sale, sellers should have the home inspection completed and a report ready for review.  Needed repairs can be made before hand or contractors can be contacted to have estimates on hand.

Cash offers carry the most weight.  If you arrive at the bargaining table with contingencies, your negotiating prowess is reduced.  So come prepared and everyone wins.

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