What is a conditional offer?

When you buy a house, there is usually a clause based on the following:

1. A home inspection
2. Selling your house
3. And most often, arranging mortgage financing.

There is a 5 day clause where you will need to arrange the mortgage. However when there are bidding wars, at times, you are advised to go with a firm offer so that the vendor can accept your offer compared to others.

But that can be dangerous because:

• If you are putting down less than 20% as a down payment, it is the Insurance (through CMHC/Genworth or Canada Guaranty) that has the power to approve your deal or not.
• The bank may require an appraisal and if the house is in bad repair the bank will not finance it. At times, if the appraisal is less than what you bought for, you will need to put more money down as a down payment.
• If it was a “grow-op” the bank will not finance it

As strategy it may be best to reduce the days on financing from 5 days to 2 or one day.

So if someone tells you to go firm on an offer, they better have the entire money to lend you. Otherwise, you must and should always place a conditional offer on what you buy. 

Always be informed

For more information contact your Toronto Mortgage Broker 

at 416-920-9931

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