When making an offer to purchase a home, you must consider any terms you need to include in the agreement. The inspections, insurance coverage, and sale of another home are all standard criteria. The most vital criteria, however, concerns your ability to secure financing. Unfortunately, many buyers waive all conditions in a seller's market to make their offer more appealing. You do so at your own peril!
What is an unconditional offer?
An offer is deemed unconditional if there are no conditions linked to it. Neither the seller nor buyer can back out of an unconditional offer after it has been accepted.
Unconditional offers, also known as "cash buyers," can be quite appealing to sellers.
Before making an unconditional offer, make sure you have completed all your property inspections, you've seen the available documents, and that your financing is 100% authorized.
What are the dangers of signing a contract that isn't conditional?
As a home buyer, entering an unconditional contract implies increased risk, especially if the deposit payment amount is large. It's because in the event you fail to settle the contract, you risk forfeiting your deposit and being sued for more. So before writing an unconditional offer on a home, consider the following risks:
In your rush to purchase a property, you may overestimate its market value, forcing you to spend far more than you should.
It is vital to conduct thorough research before writing an unconditional offer on a property. You can accomplish this by hiring an appraiser.
Problems with the property
There are a few difficulties that could prevent mortgage lenders from financing the property or insurance companies from insuring the property, including:
- Risk of asbestos—insulation using vermiculite
- Mildew, damp, or mold
- Faulty HVAC or mechanical system
- Well water that is contaminated and isn't drinkable
- Structural Issues, for example, a septic system foundation that is damaged or a sinking foundation
Forfeiting your deposit (Lack of a finance clause)
There're still chances that your financier will decline your application for a loan or won't release the funds to you on time. In this instance, you may be unable to complete the transaction and lose your deposit and more. Before writing an unconditional offer, you must be satisfied that you will have the cash necessary to close on the deal, either through savings or certainty that the mortgage application will be completed within the right timeframe.
Wrangles with local authorities
Ignoring the government and rushing to make an offer can land you in hot soup. You need to perform your due diligence and check with the local government that summarizes all the information they have on a property. The report may consist of the following:
- Information on zoning rules and regulations in the area
- Any natural factors that may impact the property's use (for example, coal mines)
- Any planned utility facilities (for example, drainage), roads, and other developments that might influence the site
- Current tax rates, as well as any overdue rates on the property
- Information about any cultural, protected structures, or heritage properties in the area and if the property you are looking to buy is likely to fall in this category in future
If you cancel the deal, the property seller may sue you for damages, especially if they cannot purchase another home because of your backing out.
Before writing an unconditional offer on a home, check with a Nanaimo real estate agent and an attorney to learn about what provisions you should include in the agreement. It's crucial to ensure you're fully covered against any factor that might indicate the property you're purchasing isn't what you thought it was before signing a contract.