It is a crazy market out there, possibly you are on your third or fourth offer and you are getting tired of losing out on an offer once again. You want to go subject free. I get it and I understand. Buyer’s Fatigue is real.
Here are 5 standard conditions and where and when you may consider going subject free.
Financing: This is a big one. It is difficult to go subject free on financing if you have less than 35% down. Many people will say 20% down, but here is why it should be more than 20% down. What if the appraisal comes in short of the purchase price? Appraisers are often conservative in a hot market, especially if there have been very few comparable sales in the area. Let’s suppose a house is listed for $500,000 and you get it for $600,000. What if the appraisal comes in at $575,000? Is that going to be okay with your current down payment?
Another key factor is the lender must approve the house for financing. It is not just you that is being approved. At the end of the day, if you stop making your payment the bank will own that home. Mobile homes, condominiums, townhouses, and older homes may have challenges that the bank doesn’t like. Banks like newer, marketable homes that they could sell in a foreclosure situation. A bank will analyze if your home would sell within 60 – 90 days in a buyer's market.
Insurance: This can be bigger than financing as there are so many questions on an insurance policy. It may seem like waiving insurance is a no-brainer, but at the end of the day, if you can’t get insurance, you cannot complete on your mortgage. If you plan to waive this condition make sure you can answer all the questions your insurance company is going to ask and deal with this before you write the offer. Questions include the type of wiring, age of the furnace, age of hot water tank, age of baseboards heaters, are there fire detectors and a multitude of other questions.
If you plan to waive the insurance, get the insurance set up before you write the offer. When viewing the house take photos of everything that an insurer may ask so you can refer to the photos when discussing your insurance needs.
Inspection: A seller's market is a great market to flog off a challenging house that possibly could not sell in the past. Be aware of this and ensure you are making informed, rational decisions. Aluminum wiring, asbestos, oil tanks, bad roofs, cracked foundations, the list can go on and on.
The best way to waive this clause is to get the inspection done in advance before you make the offer. This does 2 things, it shows that you are serious and have invested in the property and secondly it lets you know if this is the right house for you. An appraisal is approximately $500 give or take, so you must be really keen on the property to make this sort of investment upfront.
Title: Title is a standard condition that can be reviewed before you make an offer. Titles are public records that can be pulled and gone through with your lawyer/notary if there are any strange clauses.
Property Disclosure Statement: The property disclosure statement should always be reviewed before writing an offer and any questions clarified upfront.
Strata Documents: Before COVID it was difficult to be able to waive this condition as technically not all strata documents should be provided before an accepted offer is in place. There has been some leniency to this during COVID and often all the strata documents, or at least most strata documents can be reviewed in advance.
There is a definite risk/reward that only you can decide about what conditions you can waive. If you cannot waive financing, insurance and inspection, you can make the offer better in other ways. Work with the seller's preferred closing dates and make the timelines for conditions as short as possible.
Waiving conditions may seem like the only way to win in a multiple offer situation, and that might be true. Before you go "subject free" carefully evaluate whether or not you can handle any potential consequences.