I am not a lawyer. I do not and can not provide legal advice. Insert any other required disclosures here that are needed. I am a Mortgage Professional with 16+ years of experience and want to discuss making a subject free offer on real estate.
The subject of a subject free offer is a hot topic. The Globe And Mail posted an article about it on Leap Day and I recommend you read it here before reading further into my post.
I overheard a Realtor this morning laughing about the current state of the Vancouver housing market. "I haven't written a subject offer in over eight months" he projected like it was an accomplishment. In my experience over the same past eight months only ONE client has secured an accepted offer with a subject clause. One.
Let me back up for those who have never bought before. Typically you would approach me and we would complete an application, pull your credit bureau, collect required documents to verify income and down payment etc and then determine your maximum affordable mortgage amount. Next you would engage your Realtor to find your dream home within your affordable price point and begin to prepare your offer. The offer is several pages long and contains legal provisions to bind you the buyer and the seller to the contract. The contract is legal and binding if accepted by the seller. In past years buyers would put in subjects that would have to be satisfied and removed prior to binding them. Examples are: receipt of property documents (eg strata documents, property disclosure documents), satisfactory inspection and financing. Today these subjects will kill your offer. Today you have to be ready to present a subject free offer with open dates and a deposit draft in hand and a killer Realtor presenting why your offer is the best.
Simple fact: unless you have the full purchase price in cash in your bank account, the offer is not actually subject free. Here is the disconnect. To the seller yes, it's a subject free offer and could secure you a legal and binding contract. To you as the buyer if you require financing on the property its still a subject free offer however you still haven't met all the subjects that you actually need to complete on the property. Depending on what has been done prior to offering you may still need to do an appraisal and have the full file sent off to the lender for review and approval.
So why get pre-approved at all then? Simple. You need to know that YOU are credit worthy and to determine what you can afford. You need my experience to tell you if its even remotely okay to go in subject free. You need me to review all the property documents, arrange early inspection and appraisal if we can and make a recommendation on the property also being approved by the lender.
Whats the worst that can happen? I'll just lose my deposit cheque right? NO. Back to contract law, you have entered into a legal and binding contract. If you ask to be released the seller can say no and hold you in breach of contract to complete on the property. Enter lawyer here. It has happened and will continue to as long as we allow subject free offers to be the norm in our market.
So where does this put you? In the hot seat for sure! It puts you in the terrible position of making a subject free offer to give yourself the best possible position to get your dream home. I will never recommend this as a Mortgage Professional but will tell you again over the last year only ONE of my clients secured their home with subjects in their offer. One.
If you are going in subject free make sure you are as well informed as possible. I am here to help you through this process and ensure that you aren't left standing out in the cold if you can't close on your property. Don't stand alone, reach out!