Buying a house or a condo – what could go wrong?
May 20, 2023
Believe it or not, there are many things that can go sideways when you’re getting ready to close on a house or condo. Sometimes it’s something minor like the home needing a good cleaning because it’s not left the way it should be, and sometimes it is more serious like the current residents not actually moving out when they are supposed to. In fact, there are so many things that can go awry, this blog is a two-parter!
Among the many benefits of using a (ahem) seasoned realtor, is that not only do I know when something doesn’t feel quite right, I know the questions that need to be asked in order to prevent problems from even occurring. Let’s have a look at some of the more common things that can happen and how they can be thwarted.
Unless you’re paying cash and if the situation allows for it, I always recommend including a five day financing condition in any offer you submit on a property. This allows you to secure a firm commitment from a lender that’s satisfactory to you, otherwise the sale becomes null and void. This is important because, although you may be pre-approved, there are more hoops to jump through before getting a firm commitment from a lender.
With a financing condition, if you don’t truly qualify for the amount you’re asking for, the contract can be cancelled, and you get your deposit back, eventually.
That said, in a hot market, an offer conditional upon financing can be the clause that makes the difference between you getting your dream home or not. When a seller is presented with two similar offers and one is ‘clean’ (ie, no conditions), a seller will usually go with the clean offer. Working with an experienced mortgage broker who has access to a number of lenders can help with any speedbumps.
People often ask about how quickly a property can close. I understand, a new home is exciting, and you want to get in there, especially if the property is vacant. However, I recommend a minimum closing period of 30 days.
You may be pre-approved for a mortgage, but a lot more is required when a lender is about to hand over hundreds of thousand of dollars, and you want to make sure you have enough time to dot your i’s and cross your t’s.
Your lawyer (who will likely suggest a minimum of 45 to 60 days) has to do title searches and there is a lot of paperwork, which sometimes needs to be corrected, not to mention that a lender may require additional documentation depending on your situation.
Delays can happen, especially with backlogs at the bank. I’ve spoken with a number of lawyers frustrated with securing funds, so the smartest thing you can do is have a reasonable closing so that any hiccups can be taken care of. I know you want those keys, but you’ll sleep better knowing that everything has been settled.
One other related tip is to book your move for the day after the closing date and not the day of the closing. If there are delays on closing day, it means you may not get your keys on time. If you’ve booked movers for the same day, you’re paying for them.
Sometimes buyers have second thoughts once the excitement has dissipated. If you’re buying a pre-construction condo, there is a 10-day cooling off period, in which you can back out of the deal for any reason. But that doesn’t exist on a re-sale.
So how can a buyer legally back out?
If there’s a substantial discrepancy and the buyer thought they were buying a property that they aren’t getting, then there may be an opportunity to walk away or renegotiate… but a contract is a contract and they are easier to get into then they are to break. Also, if by chance you are able to walk away, you don’t just automatically get the deposit back. You have to prove that you were wronged and deserve the deposit back and sometimes the courts have to get involved to settle any issues.
If your offer is conditional upon the home inspection and something major is discovered, it’s possible that the contract can be cancelled. That said, I have yet to come across a deal that couldn’t be saved, whether through a repair or an adjustment of the purchase price.
One way to prevent any surprises for both parties is for the sellers to have an independent home inspection done before the home goes on the market. It’s not uncommon for the sellers to do this in preparation for listing their home. Not only does this reveal any red flags with the home, if the listing may potentially receive multiple offers at one time, it could bring comfort to buyers to be able to review the report in advance of offering in order to submit an offer without a home inspection condition.
When buying a condo, there’s almost always a condition that the lawyer has to be satisfied with the status certificate package. This package allows the lawyer to review any and all documents related to condo you’re interested in and the corporation within which it’s registered. The seller’s agent usually has it available prior to listing the property on MLS and if not, it’s easy to order.
The interesting thing with this condition is that it often requires the lawyer to be 100% satisfied – and if they aren’t, the offer can be withdrawn without giving the specific reason.
Next month: what happens if the home sellers haven’t actually moved out?