If you are planning to buy a Markham, Richmond Hill or Vaughan house for sale, before you do, you will need to make an ‘offer’ to buy the home you want. Primarily, the offer tells the homeowner how much you are willing to pay for the house. There are two basic types of real estate offers conditional offers and unconditional offers.
Conditional Offers
Conditional offers are by far the most common type of offer. As we outlined in our article ‘What is a Conditional Offer and How Does it Work?’, when you make a conditional offer, in addition to outlining how much you intend to pay for the home, you include certain conditions for the sale to happen and a timeline to meet the conditions.
A very simple example is making an offer conditional on the sale of your house within 30 days, so that you—the buyer—can obtain financing. If the home seller accepts the offer as is, and your house doesn’t sell within 30 days, then you are not obligated to buy the home.
Unconditional Offers
An unconditional offer is an offer to purchase with no conditions attached to it. When you place an unconditional offer, you are bound to pay the price you outlined in the offer, even if your plans to finance the purchase of the home fall through.
Generally speaking, if you need a mortgage to purchase a home, you should avoid making an unconditional offer. Even if you have been pre-approved for a mortgage, you may not get the financing conditions you need to buy the home.
Mortgage approvals are not based on your situation alone. Your mortgage holder and the insurer (Canada Mortgage and Housing Corporation – CMHC) must also approve the property for which they issue the mortgage.
In certain real estate markets, the chances are higher than your lender and the CMHC may not approve the financing for part or all of the purchase price of the home you choose.
For example, say it’s a seller’s market and all your offers are being beaten by higher bids. To finally get a home you want, you may be tempted to make an offer above the value of the home and make it unconditional so it is more attractive to the seller.
However, even if the seller accepts the offer, the CMHC may not agree with the value you placed on the property. That means you will need to find additional financing for the difference between what the CMHC will approve and what you are bound to pay for the home.
If you cannot find ways to cover the additional financing, you may lose your down payment and may be sued for any damages the buyer incurred.
If you need financing to buy a home, you should always make conditional offers that include financing conditions.
Trying to buy your first home? Learn more about what to expect in our article “First Time Home Buyers in Ontario – What You Need to Know”.