I've been seeing a lot of people bid on properties with no conditions at all in hopes of winning by giving them an edge. I understand the need to win a property, but I find that this usually happens when people have lost on a couple bids and are becoming desperate. I call this "Buying Tilt".
However, I warn against this practice because these conditions were designed to protect the buyer. Case and example:
My very first offer on a condo was during the heated Spring of 2011. During this time, when a bunch of new condos were listed, and they popped up on my filter, I had requested my agent to book them for me. I had 8 lined up for after work! Exciting times! Unfortunately, by the time I actually got to downtown Toronto, only 3 were left, the other 5 were conditionally sold. What the heck.
This continued for a good couple months, with multiple offers on almost every condo we were interested in. We learned soon that in order to buy something, you had to be willing to act quick. We saw enough places that we knew what it is we were looking for, and at what price range we wanted it at. The rest was up to fate.
Finally we saw a fantastic 2BR with parking, 900 sqft, and a good 80 dollars per sqft lower than anything else on the market. We put in an offer right away with a quick expiration, hoping for a decision. We got a signback and were okay with price, but we wanted to make sure our conditions were in place, condition of finance, and condition of status certificate. I was at one point willing to forego the conditions if it meant winning the condo, luckily it didn't come down to that.
Super ecstatic, me and my fiance were already planning the furniture, what we would do, how our new and wonderful life would look like...not a worry in the world. Then I get a call from my mortgage broker saying that I couldn't get financing...what...the heck. I was approved for almost double of what I was asked for...how could this happen? Did I forget a credit card payment? As I delved deepered into this...I found out the property was red flagged. Strange. I called another broker that said 6 other financial institutions also rejected funding this. Huh.
I called the building property management and found out that their parking was flooded, and that a balcony had fallen before as well requiring a retrofit. There could be a potential for a special assessment! This means, if the reserve fund was not adequate to pay for all these maintenance issues, the owners would have to fork out an additional lump sum to cover the balance. Yikes...well, thank goodness for the condition on financing.
I got out scott free from that disaster, and didn't even have to fork out lawyer fees to find this all out during the status certificate review.
Essentially, what it comes down to is this condo could only sell if someone bought in cash. How many people could afford that? Yea you know who...the 1%. If I forgone that condition of financing, I would have been legally obliged to purchase that property in all its disasterous glory. I would have been stuck with a property that could not be sold...and my bank accout sucked dry.
Long story short...don't leave out those conditions, they are there for a reason.
- Eric Chan || Eric.email@example.com || 416.707.7128 || www.century21.ca/eric.chan