These days, with inventory so low and demand so high, multiple offers are the norm in many parts of the GTA. This can elicit many different emotions from your buyers, including frustration, anger, or fear, and they also often get up in the excitement, From our perspective, because we want to help them the best way we can, we often advise them to go in firm and pay as much as they possibly can, in order to make their offer the most attractive.
This strategy, however, is a double edged sword. While a firm offer with highest price has a higher likelihood of being accepted, there are many potentially very expense risks.
The two most common conditions, as you well know, are financing and inspection. Not including an inspection condition can result in your buyers buying a perpetual money pit, to the point where they can not afford to make the necessary repairs. This may cause them to have to sell the property, and, if it’s not in good shape, they may have to take a loss, which will include the costs associated with moving (movers, commissions, land transfer tax on their next purchase, etc). If they can afford to make the repairs, that money is now no longer available to go towards the other things they had planned for it.
Without a financing condition, your buyers may not qualify for the higher amount and/or the property may not appraise for the amount of the purchase price. This will mean your buyers have to come up with the full amount of the difference between the appraised value and the purchase price in cash, which they may not have. This may mean that they can not close, which could mean loss of deposit, or worse.
A solution for the inspection dilemma is that your buyers can have an inspection done before they make an offer. This way they are in a good position to know how much they would need to spend to make the necessary repairs before they make an offer, which may impact how much they offer. However, your buyers may end up spending the money on the inspection but not end up with the house. Alternatively, there may be an inspection report available from the seller, but your buyer should know this report may not be a full or comprehensive report and it should probably be taken with a grain of sand.
It must be kept in mind that our role is not to decide for our clients what they should do. Our role is to make our clients fully informed with all of the options along with the pros and cons and the possible outcomes of each option and allowing them to make an informed decision.
If they decide to not include or waive conditions, it’s a great idea to have them sign Form 127 (Conditions In Offer-Buyer Acknowledgement). This will ensure they understand the effect of not including conditions and will ensure that you have fully explained the potential consequences.
As always, if you have any questions about this or anything else, I am here to help.