Two of my friends bought homes this spring. They had to purchase without conditions and found it to be nerve-wracking. I’ve heard that the real estate market is different now, and that conditional offers are being accepted. Is this true? – PLAYING IT SAFE
DEAR PLAYING: Over the course of the last five years or so, the Waterloo Region real estate market has undergone periods where it seemed like most offers had to be firm to compete. In the thick of a heated seller’s market, when homeowners had the privilege of receiving five or ten offers, the process of choosing one was often simple. A seller would typically have looked for the offer with the highest price tag and the fewest (or a lack of) conditions.
In the early part of 2022, the struggle to purchase left some buyers with limited options. To rise above the sea of competitors and land a deal, many had to go in firm, which meant submitting an offer with no conditions.
Offers with conditions are promises. I often tell clients that while an unconditional offer is like a bag of cash sitting on the table, a conditional offer is a promise made by someone you don’t know, who says if something specific happens and everything goes well, they will buy your house.
Conditional offers have been around for as long as real estate has been changing hands. They provide a safety net for the buyer on a number of fronts. A financing condition ensures the buyer’s lender will agree to lend them the funds they need. An inspection condition lets the buyer confirm that the house is in tip top shape. An insurance condition guarantees that the buyer will get the type of policy they need to feel safe moving forward, and sometimes a sale is conditional on approval from the buyer’s lawyer. From a buyer’s point of view, conditional offers are a safe way to do business.
When the market is booming and inventory is scarce, buyers experience a Fear of Missing Out (FOMO). Some may forgo conditions to make their offers more appealing. In a balanced market like we’re seeing this fall, there are an equal number of buyers and sellers, which eases the competition and gives buyers more of a chance to play it safe.
At the time of this writing (Fall 2022), the real estate landscape has changed dramatically from earlier in the year. These days, if a house hasn’t sold and there’s only one offer on the table, a seller may be inclined to accept an offer with conditions. Conditional offers shouldn’t scare anyone. Waiting on conditions to be fulfilled may leave sellers feeling like time is standing still, but they give buyers a level of comfort that has eluded them in recent years.
PRO TIP: The real estate landscape changes daily, even in a balanced market. Understanding the difference between home value and asking price is critical. Almost half of today’s listings are selling at or over asking price. Your real estate professional can help you navigate the market. #Advice #AskDavid #TheNegotiator
David is a top-selling Broker in Kitchener-Waterloo Region. He works personally with you when selling or buying your home. Call or text today for your free home evaluation! 519-577-1212.