If you’re thinking about buying or selling a home, the latest headlines might have you feeling a little perplexed about your next move. However, there is no reason to put your plans on hold, regardless of what the news is reporting.
The truth is these headlines could be from last year, or they could have been from ten years ago. Real estate is constantly changing, and the best way to prepare for a successful transaction is to know how the market works and how to position yourself for a favourable result. In this article, we’ll do a deep dive into unconditional offers and how to protect your interests when buying or selling a home.
What’s Happening in Today’s Market
When are unconditional offers most likely? It depends primarily on the real estate market itself. Conditions fluctuate, but one of three scenarios is generally true. We will either be in a Buyer’s, Seller’s, or Balanced market.
- A Buyer’s market means Buyers have the advantage. With many houses available, there is very little competition, and Sellers may have to make concessions to make the sale happen. We see the fewest unconditional offers in these scenarios.
- A Seller’s market favours the Seller. Buyers often face steep competition because there are not enough listings to go around. Not only are unconditional offers common, but you may also see multiple offers and bidding wars.
- A balanced market is when the supply and demand are equal. This is not necessarily a negative scenario, as it could be of benefit to both the Buyer and the Seller. The Buyer may have an opportunity to negotiate on the price and include conditions in their offer. The Seller may still sell for fair market value and in reasonable time, which could result in a win for both sides.
However the market is behaving in your area, the advice of a local real estate agent can help you achieve greater results when buying or selling.
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What Sellers Should Know About Unconditional Offers
Placing an unconditional offer is an assertive move on a Buyer’s part. If they’re going to such lengths to win their bid, they must have a reason for it. It could be that conditions are highly competitive and an unconditional offer is the best way to stand out. Or they might really want a particular house. In either case, receiving unconditional offers is great news when you’re trying to sell your home!
- You don’t have to wait to see if your Buyer’s financing clears.
- There is no home inspection to contend with.
- There isn’t an opportunity for the Buyer to walk away from the sale and use a condition in the offer as a way out.
- The sale is firm and a binding agreement that the Buyer must fulfill. If not, there would be serious ramifications for the Buyer.
When considering an unconditional offer, you always want to be sure that the Buyer has the ability to follow through. The key is to work with an experienced real estate agent who knows what questions to ask to ensure your Buyer is qualified.
What if the Buyer does try to back out of the transaction? This scenario is unlikely, for several reasons.
- First, you’ll receive a deposit within a day or two of accepting the offer. This usually works out to 5% of the selling price, which is a lot of money for the Buyer to forfeit if they are unable to close.
- If the transaction does fall through, you could sue the Buyer for your continued carrying costs and any difference if your house ended up selling for less than what they agreed to.
- Most of all, suitable houses are in short supply! Once a Buyer falls in love with your home, they will do everything in their power to ensure the transaction proceeds as planned.
Preparation and research are critical to a successful sale in the current market. The following resources will help:
- 5 Essential Steps When Preparing Your Home For A Spring Sale
- New Laws In Real Estate For 2023: A Lawyer Weighs In
- How To Prepare Your Home Like A Luxury Listing
How Buyers Can Manage Risk and Create Compelling Offers
With the demand for housing on the rise, you may often find yourself competing against other Buyers, especially when you find a home that seems perfect. Depending on the market, you might not stand a chance with a Seller accepting your offer if it contains conditions.
But is it risky to go in with an unconditional offer? Not necessarily. If you’re prepared prior to beginning your home search and when you work under the guidance of an experienced real estate agent who is looking out for your best interests. Let’s take a look at some of the most common concerns and how to address them.
The worst fear associated with unconditional offers is that you might end up with a property full of expensive and unexpected problems.
However, if you complete your due diligence, you can rest assured that the house you buy is entirely suitable for your needs.
- You can conduct a home inspection before offering on a home to ensure the structural, mechanical, electrical, plumbing, and overall condition are satisfactory. This would be done at your own expense, but if it allows you to feel more comfortable to move forward on an offer to purchase, it may be worth it.
- Some Sellers, typically in Toronto-proper, may have a pre-listing home inspection to encourage firm offers from prospective purchasers and to be transparent about the home’s condition at the time of purchase.
- In lieu of having a home inspection, knowing the information on the age and condition of the big-ticket items, such as the roof, windows, furnace, and air conditioner, along with any other details about the home’s structure (i.e., is the basement foundation waterproofed?) can help you feel comfortable even when dropping the condition of home inspection.
- The Listing Brokerage is also required to complete their due diligence in asking the Seller questions to help determine the home’s condition and to verify the accuracy of all information provided on the MLS listing and the marketing materials.
- Last but not least, the Seller is legally required to disclose any known problems that may impact your decision to purchase. If they intentionally cover up an issue, you could pursue damages through a court of law.
Another concern Buyers may have is the financing. What happens if you make an unconditional offer and the bank declines your mortgage?
Once again, there are ways to protect your financial interests while remaining competitive.
- Get pre-qualified for a mortgage. This step is so valuable that we recommend everyone go through it before even beginning your home search. The lender will process your application and run your credit history. Once completed, you’ll receive a letter of prequalification that lets you know how much you can borrow, which will help to reduce the risk of going in without a condition on financing.
- Know your carrying costs and closing fees before placing offers. A good rule of thumb is to budget between 2-4% of the purchase price in cash for the closing costs. The Land Transfer Tax (LTT) must be paid upfront on the closing and is not something that can go into the mortgage. All property purchases in Ontario are subject to a Land Transfer Tax. In Toronto, there is also a municipal LTT, which means you will be paying for both the provincial and municipal (double) the LTT. If you want to know how much this will work out to, our real estate calculators can help you create a realistic budget.
- Understand how bank appraisals work. Once you place your offer, the lender usually requires an appraisal to determine fair market value. It’s critical to know that they will only approve your loan for what the house is worth, even if you qualify for more. With that in mind, be careful about getting caught up in a bidding war and be mindful of the purchase price so it doesn’t exceed a realistic value for the home, unless you have access to extra funds.
- If buying a condo, request the status certificate before placing an offer if one is available. Otherwise, if the Seller does not have a status certificate ahead of placing an offer, you WILL want to have a condition on solicitor review of the status certificate documents to determine the financial health and stability of the condo corporation so that it’s a well managed build you’re buying in. This is the one condition you would want to have, regardless of market conditions.
What’s the next step after buying your perfect new house? Making it feel like home is a top priority, and the following posts will give you plenty of creative ideas:
- Luxury Design Trends For 2023
- Top Luxury Kitchen Features For Your Home
- Simple Ways To Elevate Your Home Decor
Expert Guidance is Essential
When buying a home, working with a local real estate agent is the best way to craft the most compelling offer while still protecting your interests. Years of experience allow an agent to spot potential problems and help you avoid them, all while negotiating on your behalf. Best of all, the Seller typically pays the brokerage commissions, which means all of this expertise and guidance comes at no cost to you. A local expert by your side is the key to finding the right home at the best price and terms in any market.
Are you ready to buy, sell, or invest in the GTA? We are well acquainted with this market and will work tirelessly to help you achieve the best outcome. Reach out to us at tanya@tcteam.ca or call 647-293-3785 for more information.
