Lara Stasiw West Toronto Real Estate Blog - Length of Conditions: Timing

Welcome to Part 2 of my blog on offer conditions!

If you didn’t read Conditional vs. Unconditional Offers: What You Need To Know. That’s okay!
You can take the time to read it now, or just refer to my summary below!

A conditional offer is when an offer to purchase a property has been submitted & it includes certain conditions that must be waived or fulfilled.

My previous blog covered the following topics:
• Unconditional Offers
• Notice of Fulfillments
• Waivers
• The Importance of Wording
• Types of Conditions
• Common Conditions

I’m now going to tell you why the length of time you stipulate to complete the condition is critical!

How Much Time Do You Need?

The longer the conditions, the less attractive the deal.

A finance condition that is only 3 days is much more attractive to a seller than one that is 10 days. If you are pre-approved, the length of your finance condition does not have to be as long as it would if you weren’t pre-approved. Putting in extra days for your own comfort could cost you the house if the seller finds there are too many conditions. A longer condition period means a longer amount of time the seller’s house is off the market.

So what amount of time is reasonable & expected for different types of conditions?

• 3-5 business days

Have you done your homework? Do you have a pre-approval? Maybe you have a large down-payment & only need approval for a small mortgage so you are confident in your ability to obtain financing.

The more prepared you are, the fewer days you need to allow for your financing condition & the more appealing your offer will be to the seller.

If you are not pre-approved & are a first time home buyer with only a small % down, you will need the full 5 days to obtain financing.

*keep in mind that some lenders require their own appraisal before approving financing on a property

• 3-5 business days

A home inspection will require access to the home (obviously), so this process is dependent on the schedule of both the sellers & the inspector. Generally your agent will have a reputable home inspection company they deal with regularly. Allowing at least 3 business days to gain access at a time that also works with your inspector is reasonable. On occasion, it may be necessary to extend this to 5 days.

• 3-5 business days, starting when you get the Status Certificate

Usually the Listing Agent is allowed 3 days to request the Status Certificate. A Condominium Corporation can take up to 10 business days to deliver it. Then your lawyer will be given a number of days to review it. If you add all of these up, this is a process that can take up to 18 business days. That is not ideal for ANYONE involved!

Some Listing Agents will have pre-ordered the Status Certificate when listing a property for sale, anticipating the inclusion of this condition & eliminated the added period of time to obtain it.

It is strongly recommended that you know the lawyer you will be using ahead of time. If you are planning to buy a condo, do your research in advance of placing of offer. By doing so, you can keep your condition shortened to 2 or 3 days for review. You won’t need to allow added time to find a lawyer & can keep the conditional period short & sweet.

• 3-5 business days

Similar to a home inspection, this requires scheduling with the sellers & your appraiser. An adequate time allowance depends on everyone’s individual schedules.

Remember, the shorter a condition the more appealing your overall offer. If you have a lawyer ready & willing to review your status certificate within 2 days, put 2 days. Make sure you allow yourself enough time to complete what is required without dragging out the process.

Does Timing Matter?

Put yourself in the seller’s shoes.

If you accepted an offer from a buyer that is conditional upon a home inspection that they have 2 weeks to complete, you are taking your house off the market for those two weeks with no guarantee you will have a firm deal. As a seller, your ideal situation is a firm deal with no conditions. Any conditions that lengthen the time between an accepted offer & a firm deal are a compromise from the seller.

Give yourself enough time to complete the conditions without dragging out the process.

Running Out Of Time?

Let’s say your offer was accepted with 5 days to obtain financing. You are now at the mercy of your lender. What if it is the morning on the 5th day & you still have no guarantee? What if the mortgage rate you thought you would get didn’t go through so you are back on the hunt with a different lender?

You have 3 options:

1. Ask For An Extension

If they have accepted your offer & have agreed to wait out the period of your conditions, they are likely wanting & willing to complete a deal with you. You can ask them for an extension that they will either agree to or not. Maybe there’s been interest in the property since your offer was accepted & they don’t feel confident you’ll end up signing back a firm deal. If they won’t grant you an extension, you have 2 more options.

2. Go Ahead Anyways.

This is a huge risk. If you waive a condition like financing without obtaining financing, you are accepting the financial risk. The deal is firm & the property is yours, so you will be responsible for the finances of that property regardless of whether or not you can obtain financing. There are few instances where this is advisable.

Example: A purchase is conditional upon the sale of your current home. You are in a good financial position & can carry both houses for a while, but have included this clause as a protector measure for your benefit. Your house has not sold in the specified period. You may choose to waive that condition since you know you have the finances for both properties & do not want to risk losing the new purchase.

3. Move On.

This is a huge risk. If you waive a condition like financing without obtaining financing, you are accepting the financial risk. The deal is firm & the property is yours, so you will be responsible for the finances of that property regardless of whether or not you can obtain financing. There are few instances where this is advisable.

Multiple Offers.

Is it a seller’s market?
Are there a lot of buyers & not a lot of real estate inventory?
Have you lost out on 3 properties with multiple offers already?
Is your dream home listed WAY under market value to drive a multiple offer scenario?

When there is not a lot on the market, if a property is under-priced or properties are being sold very quickly with competitive, multiple offers, deals can be done with no conditions.

Is this advisable? It is up to you.
No one can make you go unconditional with your offers. It is not the right move if you do not have certain items in place before making your offer. If your offer is accepted, the deal will be firm & you will be responsible for taking ownership whether you are prepared or not.
You must be prepared if you are planning to submit an unconditional offer.

No conditions doesn't mean no protection.

When unconditional offers are placed, usually finances have been determined prior to looking for properties. The listing agent may have had a home inspection done to eliminate the need for that clause. You may be taking a risk on the financial state of a condominium corporation forgoing a condition to review the status certificate. On the other hand, the listing agent may have pre-ordered one & you had a lawyer on hand who reviewed it prior to the property’s offer date.

Again, is this advisable? It is up to you.
If you are prepared for a competitive market & have done your homework, you may feel comfortable submitting an unconditional offer so you don’t lose out on your 4th condo offer. If it is in a building you don’t know very well & the listing agent hasn’t prepared a status certificate, this may not be something you are comfortable with so your hunt will continue.

Multiple offer scenarios are very subjective. There is no one recipe or answer. It depends on market conditions, your situation & the property itself.

Ask your agent for information & advice! It’s their job to help.

Lara Stasiw • Real Estate Agent & Home Design Connoisseur

Lara Stasiw West Toronto Real Estate Blog

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