Three home buying clauses to keep

No matter how much you want that home, don’t drop these buying conditions.

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In some areas of the country the housing market is still sizzling because of low interest rates. Homeownership has always been touted as the sure way to financial security and more than one silly-Billy has jumped into the housing market because they mistakenly thought “everyone else is buying a house, I have to buy a house too.”

No matter how anxious you are to own your own home, don’t rush the transaction. If you’re feeling pressured to make an immediate offer but haven’t taken the time to become familiar with the local market, you won’t know if you’re getting good value for your money. Worse, you may be tempted to do something stupid in your emotional desire to “win” a bidding war. Take a breath.

It’s become pretty standard in hot markets for real estate professionals to suggest that a buyer put in an offer to purchase that is free of conditions. One of the conditions that’s quickly excised is the “financing condition.” Hey, you got a pre-approval, right? You don’t need that conditional on financing clause, right? Wrong! No matter how much you want that home, no matter how sure you are that everything will be fine, don’t do it.

Pre-approvals come with the proviso that they are financing approvals in principal only; they can be revoked by the lender if they are perceived to be a bad decision—if your circumstances change, or if the house appraisal is lower than the purchase price. And that’s why the “conditional on financing” clause is important.

Another clause you should always include is the “conditional on sale of existing home clause,” which eliminates the likelihood that you’ll end up desperate to find a buyer for your home because you’re having to carry two mortgages since your old haunt hasn’t sold yet. If you have to carry two mortgages for three or four months, you’ll be motivated to accept less than your house may be worth.

And don’t skip the “conditional on inspection” clause or you might end up with a house that’s falling down around your ears.  Don’t let desperation to buy that house overcome your good sense. Ignoring the potential problems inspections are designed to ferret out can be horribly expensive.

Buying a home is a complex process. Don’t rush into it and don’t rush through it. You’ll likely have to live with your decision for a long, long time. Talk to some friends and family who have bought recently and try to get a feel for the process. Pay attention to the details. And ask lots of questions. The more you know, the better a homebuyer you’ll be.

8 comments on “Three home buying clauses to keep

  1. Great article and solid advice for anyone purchasing a new home. These clauses in my opinion should 100% of the time be included in the buyer conditions for your own protection. A home is one of the biggest purchases an individual or family makes and should be taken with great care. It's always important to take a step back, remember to "live within your means", and create a lifestyle budget to ensure you can afford the better things in life along with your home.

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  2. Really professional Realtors always protect their Buyer Clients with those clauses, (and they, therefore, protect themselves later, as well). In the Ontario slow economy since late 2008, however, bidding wars occur mainly in Toronto, Markham, Mississauga, Oakville and sometimes Vaughan, not elsewhere.

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  3. Once clause that if i was the seller I would certainly cross out of any offer.
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    Another clause you should always include is the “conditional on sale of existing home clause,” which eliminates the likelihood that you’ll end up desperate to find a buyer for your home because you’re having to carry two mortgages since your old haunt hasn’t sold yet."

    Why would a seller agree to this clause. I would not care less if you could sell your house or not and certainly not wait till it is.

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    • The seller would agree, if the seller didn't have any other bidders.

      Let's say you put your house on the market, and you didn't really get any strong bites for 6 months. Then along comes a buyer, who makes an offer with these clauses. Are you really going to turn this down at that point?

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    • Not a problem with this clause. Usually an escape clause is then added, by either realtor, that the house is left on the market and showings and offers will continue. If a new acceptable offer comes in the original offer has first right of refusal -that is they have 24 hours to remove that condition (find the cash) or their offer is dropped. The seller has no risk with this type of offer.

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  4. I have always told people that when they receive an offer subject to "an inspection acceptable to the purchaser" that they ask the the purchaser to specify there concern with the property, and word it to that.
    This clause is generally worded and gives the buyer any reason to walk away. Lets face it 20 years ago 1 in 25 real estate deals were done with inspections and 90+% of them had no major problems with the property,and how many offers with inspection (that cost $250-$500) can the first time buyer afford. This is just another fear tactic that the banks and lawyers have encouraged at publics expense to help protect them. Use common sense!

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  5. put in offer to leave stove fridge freezer washer dryer drapes and any other items that you would like to be left….the seller can counter offer that they will not leave these items…but you will not get a nasty surprise that you have to run out and buy these items….and they will be included in the selling price…………one of our friends bought a picture at a garage sale to hang over the fire place….the people who bought the home put that picture in their offer to buy….our friends said…wow we sold and were happy to leave the painting.

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