The return of conditional offers

Houses for sale in Ottawa

There’s a lot of negativity in the mainstream media surrounding a cooling housing market and rising rates, but there are some practices often forgotten when housing is red hot that benefit both buyers and sellers. 

A major bonus for your clients is the ability, once again, to have conditions attached to an offer to purchase that protect all parties, particularly conditions for having a home inspection completed and successfully securing financing before the offer is firm. 

 

Home inspection peace of mind

 

Following the past couple of years of crazy bidding wars and high demand, many buyer’s remorse stories are coming to light. People ended up with money pits because they had to get offers together quickly, and they’d lose out if they included any conditions. 

It’s really no surprise that when something goes wrong on a home, it’s often a big-ticket repair. And while homebuyers must anticipate ongoing maintenance expenses, having a home inspection as a condition on an offer enables your buyers to learn more about their potential new home and better plan for repairs that may be needed.

In addition to encouraging your buyers to include a home inspection condition in offers, suggesting to sellers that a home inspector complete a pre-inspection prior to listing can help set your client’s property apart from others already for sale in the neighbourhood by highlighting the sound investment buyers can expect when purchasing the property. In a cooling market especially, this can be an invaluable practice. Being proactive with a pre-inspection may even eliminate the need for a home inspection condition.

All home inspections should disclose the condition of the structure, foundation, plumbing and electrical systems, windows and roofing. An inspector will provide alerts to caution areas based on the house’s age and specific characteristics, note previous renovations and specify issues that must be addressed immediately versus ones that can be remedied in the future. 

Both pre and post-offer home inspections include thorough reports that become the property’s operations manual, detailing deficiencies, safety concerns, system shut-off locations and maintenance suggestions. Of course, the more educated everyone is on a property, the better for your clients – buyers and sellers. 

 

Mortgage pre-approval isn’t guaranteed financing

 

With rising interest rates comes tougher mortgage qualification, or more specifically, your clients may be approved for a lower mortgage amount than expected. And while they may feel confident with the mortgage pre-approval they obtained prior to home shopping, a pre-approval is far from a guarantee for home financing.

The pre-approval will typically be valid for 90-120 days. During this period, it’s important for your clients not to make any significant changes to their current financial situation. When it’s time to draw up the offer to purchase, their lender will want to verify that they still meet the qualification criteria as well as assess the property’s value and suitability. If there are changes that could possibly derail the process, your buyer could be denied a mortgage despite having been pre-approved. When in doubt, your clients should consult with their mortgage broker or lender before making decisions that could impact their financial situation.

Three key areas your clients should pay special attention to include: 

 

  1. Maintaining a good credit score.
  2. Refraining from increasing debt loads.
  3. Keeping employment and income consistent. 

Including a condition of finance within the purchase offer gives your buyers valuable time after the offer is accepted to arrange their mortgage, which is especially important in today’s increasing interest rate environment. 

Conditions exist for a reason, so taking advantage of them can be beneficial for both buyers and sellers in ensuring everyone is well-versed in the home’s condition and that sufficient mortgage financing can be obtained.

 

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