We’re trying to find a home in this hot market and were told we should waive certain conditions when we submit offers. What should we be worried about?
When buyers find themselves in potential bidding wars or a highly competitive market, there is a temptation to start dropping conditions that are designed to protect them.
As well as being aligned with your real estate professional and having a firm strategy before making offers, another key component is understanding your tolerance for risk.
Conditions typically inserted into an offer relate to property inspections, buyer financing, state of title and status certificate, to name a few.
Property inspections offer an opportunity to be advised of potential defects in the building. If serious issues are found, this allows the buyer to make decisions about whether to proceed or seek a reduction in price.
A buyer financing condition allows the buyer time to confirm that they have been able to obtain mortgage financing once all relevant information and assessments are received. In a market with escalating bids, if a home appraiser finds that the value of the property is less than the amount you have offered, you will have to make up the difference between the appraised (approved mortgage) value and what you agreed to pay in the offer.
A review of the state of title, performed by a real estate lawyer, will reveal any encumbrances on a home’s title, including any existing or pending covenants, easements, building restrictions, rights of way, registered mortgages or charges. These, among other factors, can affect your use of the property, and should be reviewed and understood before agreeing to purchase the property. You may also want to have your real estate lawyer check the zoning of the property to ensure the municipality will allow you to use the property how you want — for example, if you wish to rent the basement.
For condo purchasers, a condition relating to the request and review of the status certificate is common. The status certificate contains a significant amount of revealing information about the property, including the financial health of the condo corporation, any arrears or anticipated special assessments, maintenance fees, the reserve fund study and the condo corporation’s declaration and bylaws.
While including the conditions that are important to you in the offer is a good idea, you’ll want to give yourself enough time to properly address those conditions and ensure you have all the information you need to make a decision.
The number of days that you, as a buyer, can take to meet or waive your conditions is not standardized, and is typically written into the offer.
These are all issues that are best discussed with your real estate rep or broker, and real estate lawyer, so that you can understand all the risks involved in an offer and gauge your comfort level before you submit a bid.
If you have a question for Joe about the home buying or selling process, please email firstname.lastname@example.org.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.