A conditional offer means that a buyer is interested in buying the home, but with expectations that certain conditions will be met. Naturally, sellers tend to gravitate towards firm offers, especially if the seller is dealing with multiple offers. However, conditional offers can seem more appealing when the buyer is offering more money or the buyer includes things in the deal to make it more appealing.
Typically, there are three common situations that cause buyers to put conditions in an offer.
The first common condition in a conditional offer is that the home passes a formal home inspection before the deal goes through. Buyers want to feel comfortable with the condition of the home, and certain no expensive issues arise (like mold, water damage, etc.) after the purchase of the home.
The second common condition in a conditional offer is financing. Sometimes buyers want to purchase a property before being approved for a mortgage have their down-payment sorted. This gives the buyer a window of time to get their finances in order. Sellers should be wary of waiving this type of condition to hurry along with the selling process. If financing isn’t approved and the sale falls through the cracks, there could be legal consequences. For buyers, getting pre-approved for a mortgage eliminates this hassle.
The third common condition in conditional offers is the condition that the buyers home sells. Obviously, this isn’t ideal for the seller since it can slow that sale process and there isn’t any guarantee that the buyer will sell their home. Homebuyers in this situation should apply for a bridge loan from their lender. A bridge loan can give them temporary financing to cover the costs for their new home and their existing home.
It is important to note that in all conditional offers, there is a time limit. If terms aren’t agreed upon after time is up, the seller can begin to take other offers.
On many issues, the NDP and Liberals don’t see eye-to-eye. However, with Trudeau’s reduced seat count the NDP and the Liberals will likely come together on many issues to ensure left influenced legislation goes through. One issue they seem to overlap on is housing. Both parties want to have a more active role in the housing market to make housing more affordable and to increase inventory.
The Liberals have made promises to further develop the First-Time Home Buying Incentive. They have also discussed taxing foreign-owned vacant properties, in an effort to aid areas of Canada most affected by the affordable housing crisis. The NDP promised to impose a tax of 15 percent on foreign buyers and non permanent residents, create 500,000 more affordable housing units over the next decade, and provide subsidies for renters who contribute more than 30 percent of their income towards housing.
BMO economists Douglas Porter and Robert Kavcic provided a report last month that came to the conclusion that the parallels from both parties housing platforms could initiate more change in the Canadian housing market.
According to Porter and Kavcic, one area of their housing platforms see eye-to-eye is the taxation of forerign buyers and non permanent residents. The Liberals likely wouldn’t agree on a tax as high as 15 percent but would be open to the possibility, considering the inspiration they drew from the idea during their campaign.
Porter and Kavcic did have some criticism for they parties approaches to the housing crisis. They claim that most of these policies focus too much on housing demand, and not focusing enough on housing supply, and the logistics of combating it.
The two economists, Porter and Kavcic, said in their report “The NDP proposal to “create” a half million affordable units over a decade would boost annual housing starts by about one quarter, so it’s a material pledge. But, the question is: how can that be accomplished, and would it involve subsidizing builders or buyers? If the latter, the boost to demand could neutralize the restraining effect on the prices of new supply.”
Are both parties taking the right approach? Are both parties platforms focused on the right things, and if they are, how big of an effect will it really have?
During the start of a mortgage, it can be extremely discouraging to see more and more of your monthly mortgage payment going towards interest instead of the principle. When a mortgage is at its peak, borrowers are usually unmotivated to pick up speed on repayment. With that being said, people will go to great lengths to shorten the life of their mortgage when the end is in sight. However, is this really ideal? Most mortgages have extreme penalties for extra payments in order to gain the most interest possible.
Without punishment, prepayment privileges grant the ability to arrange a percentage of the principal of your mortgage before the conclusion of the amortization period. Ask lenders what type of pre-payment privileges they allow, since lenders often offer premium rates at the expense of not allowing pre-payments.
For example, a $500,000 mortgage at a 5 year fixed rate of 3.00% interest and amortized over 25 years, would come to a total cost of $709,868.25 over the amortized period. A prepayment amount of $5,000 each year would bring the total cost over the amortized period to $661,228.60, giving $48,639.65 in interest savings.
If a borrower sees the benefit of making extra payments, what is the best way to do it? Most borrowers who have this mind-set plan to make payments periodically when excess income is available instead of scheduling to make consistent, regular payments. The problem with this is that it never works, and borrowers can’t accurately foresee when they will have extra cash or how much will be available. The smart way to go about extra payments is to do them automatically. There are two ways to do this:
1: Set the payment above the minimum required payment right off the bat. Once the above minimum payment is set in stone into your contract, it is extremely difficult to get out of.
2: Like the example I gave earlier, schedule an extra payment to your lender either at the same time as your regular payment or during a separate schedule. This is more appealing than option one because if there are changes in the borrower’s financial health, adjusting the additional payment is a lot easier.
When looking for a mortgage, always look for a contractual agreement that is in the borrower’s best interest, not necessarily the lenders. Lenders profit off the ignorance of borrowers. Borrowers should always know all their options and look for any avenue that has their best interest in mind!
FIND THE RIGHT HOME FOR YOU:
One of your Realtor’s main jobs is to understand what you want most and to find you the best possible options. Your realtor should be able to counsel you on location, school district, projected future of the neighbourhood, market analysis based on your needs and budget. Your Realtor should put your best interest first with the options they present.
HELP GET YOU PRE APPROVED:
Getting pre-approved for a mortgage is arguably the most important part of the home-buying process. Being pre-approved solidifies how big your budget is for your home purchase. Realtors should have a trusted network of mortgage brokers and lenders who can take you through the pre-approval process.
CHOOSING A GOOD INSPECTOR AND BEING PRESENT FOR HOME INSPECTION:
Your Realtor should know a good home inspector and be a vital part of the home inspection process. All potential problems should be addressed like mold, lead paint, water, etc. When a Realtor doesn’t have a good home inspector to address these problems and isn’t present for the inspection, it is impossible for them to have a deep enough understanding of the home to properly negotiate. Based on the home inspection, Realtors can negotiate price reductions or repair requests.
COMMUNICATION WITH SELLING AGENT AND BUYERS ATTORNEY:
Your realtor should be a good communicator and keep the selling agent and the buyer’s attorney informed on everything in the process of buying. Good Realtors will understand the importance of information, and keep everyone in the loop in order to keep the ball rolling.
Your Realtor should be able to analyze the value of the home you wish to purchase for an appropriate initial offer. Based on the seller’s response, Your realtor should know how to respond accordingly. Ultimately, the market will decide the value of the home you wish to purchase but a good Realtor will negotiate the best price based on that value, and tip the scale in your favour.
The Canada Mortgage and Housing Corporation (CMHC) has released the most detailed 2020 outlook for the Canadian market so far. Here are some takeaways from CMHC’s market analysis.
1. Home sales will gain traction in 2020 and 2021:
Home sales started to decrease in 2017 and that decline stayed steady through 2019. But according to CMHC’s home sales forecast, Canada is in the midst of a u-turn. Ontario and BC have seen increases in disposable income with a strong demographic-driven demand for housing, according to the CMHC.
2. Home prices are on the incline:
The last couple of years haven’t been great for home prices, but according to the CMHC that is about to change. The CMHC anticipates that Ontario and Quebec will lead the way for increased growth in housing prices in 2020, with BC following in 2021 to be on par with Ontario and Quebec.
3. Home Building Will Neutralize:
After hitting a 10-year high in 2017, home building has declined drastically since. The CMHC believes that Canadians should expect the same number of homes starting construction to stay the same throughout 2020 and 2021, which isn’t horrible considering it is hoovering around the historical average for annual homebuilding. However, with a strong economic forecast for Canada, home builders won’t be put in a position to feel weary of new projects.
Spring is the most popular time to sell homes for many valid reasons, but the market gets overcrowded because everyone’s thinking the same thing. But in the winter, there are fewer homes for sale. Less competition can lead to more demand for your home!
Buyers Mean Business:
During the winter, most people want to wrap themselves in a blanket and avoid any extra responsibility. If a buyer is out treading in the snow searching for a home to buy, they mean business. This is usually because winter buyers don’t have the luxury of time. They might be searching for a home before an expired lease, job relocation, or unliveable conditions in their current home.
INTERNET HAS NO SEASON:
Internet access to property listings has evolved the traditional buying and selling seasons. Yes, Spring is still the hottest market but people who are serious about buying homes are always on the lookout. Buyers today do most of their research on sites like Zillow and Realtor.com, especially when a pound of salt still can’t keep someone from slipping on their driveway.
Less Focus on Curb Appeal:
An advantage of selling your home in the winter is that exterior maintenance isn’t as important as it is in the warmer months. Keeping your landscaping in perfect condition isn’t as big of a worry, and it isn’t what people are focusing on. Ensuring your driveway and sidewalks are shovelled and free of ice is still essential, but there isn’t a need for your home’s exterior to stand out.
Are there any homes in your neighborhood for sale? What are they selling for? How long have they been on the market? Relevant information on similar homes for sale can give you a grasp of what to expect when putting your own home on the market.
REPAIR & UPGRADE:
Does anything need to be fixed in your home? Is anything out of date? Repairs and improvements should be considered before putting your home for sale.
Clearing any built-up clutter and doing any necessary cleaning is essential before putting your house on the market.
TRY TO BE REALISTIC:
Try and be realistic with the sale of your home. Unrealistic expectations can lead to unwarranted stress in the selling process.
Pack up and organize any items you might keep but not use for a while.
1: Don’t think twice about getting a home inspection! Home inspections ensure the safety and overall condition of your home.
2: Get preapproved for a mortgage loan, or seek advice from a mortgage broker before going house hunting.
3: Direct all communication with the seller through your realtor.
4: Make sure the seller has every component of the deal in writing.
5: Make sure all important details such as financing and inspections are included in the offer.
6: Make sure your wishlist is realistic. What can you afford in regards to neighbourhood, amenities, and size?
How old are the furnace and air conditioner? Major Appliances can be extremely expensive to repair and replace down the road. Appliances aren’t always included either. Ask what’s included and if appliances are rented or owned.
When on a showing, does it seem like the current homeowner has done what’s necessary to keep up with general property maintenance? Are there signs of pests? Shady repairs? Look for signs of mold around baseboards, window ceils, and ceilings. Is their condensation? Water stains?
These are all red flags that everyone should be on guard for during a showing. Little problems can turn into big problems down the road.
A newly renovated house always seems attractive, but ask yourself, will this floorplan work for you and your family? It’s hard to enjoy nice decor on new floors if the layout doesn’t work.
The condition of a house can be changed, the size of a house can even be changed, and we all know the price of a house can change. However, what doesn’t change is the location. Do you see a future for you and your family in the neighborhood? Is it quiet enough? Is the commute doable?