What Every Homebuyer Needs to Know About Conditional Offers

Buying a houseOne of the most misunderstood aspects of buying a home is the process of moving from accepted offer to final sale, a process also known as “contract to close.” This stage of the real estate purchase can make otherwise sane people feel as if they are in fact losing their marbles. (Really, I’ve seen it.) Let me explain.

There are essentially two types of offers made on residential properties in Lethbridge:

1) Conditional offers

2) Cash offers

A true cash offer is when the buyer attaches NO conditions to the purchase contract. This is, understandably, very appealing to sellers. It’s also not that common in the Lethbridge real estate market (though it certainly does happen!).

The vast majority of home buyers will make an offer conditional upon financing, and most of those folks will also include a home inspection condition. A smaller group still will include a “Sale of Home” condition because they cannot finance the purchase without selling their existing residence first.

Those are the 3 most common conditions written into offers. However, there are myriad other possibilities. Just know that most of the time offers to purchase are written with at least one or more conditions attached. And this is where the fun begins…

When a homebuyer gets a conditional offer accepted, no one should be breaking out the champagne.

This is because the sale is not “final” until the conditions have been waived by the buyer. That said, the moment your conditional offer is accepted, you are under contract to “act in good faith” and satisfy buyer conditions. For example, if your offer is subject to financing, you must make reasonable efforts to secure financing for the subject property and do so by the deadline negotiated in the contract, also known as the “Condition Date.”

If you don’t act in good faith, you may not only lose the home but the seller may be entitled to keep your deposit … and possibly take legal action.

Condition dates, including a specific time of day, can and do cause much gnashing of teeth, grey hair, and worry lines for all parties involved. This is totally avoidable!

Here are 3 simple steps you can take to ensure a smooth closing:

1) Find a great buyer agent. Build a relationship. Then STICK WITH with that person to the end. You want someone who will dig in when the going gets tough, ensure deadlines are met and advise you accordingly when things aren’t going as planned. A great agent can salvage a deal that might otherwise go sideways.

2) Get pre-approved for a mortgage NOW. Then work closely with that mortgage professional to ensure every nit-picky piece of documentation is ready to go. Tight communication between your agent and mortgage professional also goes a long way toward ensuring key financing deadlines are met.

3) Ask questions. Then ask some more. A lot of real estate agents don’t bother with buyer interviews. Personally, I love them. It allows me to gauge a homebuyer’s knowledge and comfort level with all things real estate. Moreover, the better informed you are about contracts, negotiations, home inspections and other tasks, the better equipped we are as a team to get you the right house for the best terms possible. Isn’t that what you want in the end?

Diving feet first into buying a home might seem like a fun way to spend a weekend or two. But it really is a process, usually a much longer and more complicated process than most folks anticipate. No real estate transaction is perfect (well, sometimes we come close!), but you’ll have a lot more success–and FUN–if you plan ahead and work closely with your agent to stay organized and one step ahead until closing day.