When do I make a conditional offer?
In today’s hot real estate market, many prospective buyers are questioning whether a conditional offer can impact the potential success of their home purchase. While there’s no one right answer to this question, it generally depends on what specific conditions are contained in the offer. Some conditions may be simple or short-term, such as requiring a home inspection or the approval of financing. Since these conditions are commonplace and shouldn’t tie up the property for long, they normally don’t have a major impact on the negotiating process. An exception to that rule would be when you’re competing against another bid in a multiple offer situation. Then, every detail can make a difference.
In a hot market, you want to make your offer as attractive as possible and you can do this by minimizing the number of conditions present. One of easiest ways to do this is by pre-qualifying yourself for a mortgage, thus eliminating the need for a condition to allow time to arrange for appropriate financing. You’re already going into negotiations knowing exactly what amount of mortgage you qualify for.
If you’re thinking of making an offer conditional upon the sale of your current home, that can be a challenge. Even in a good market, this condition could easily be in effect for a long period of time. If you don’t price your home smartly, there’s even a real chance that your present house won’t sell, so the condition won’t be fulfilled. In a hot market, a seller normally won’t be eager to agree to a condition that holds their house at an agreed upon price and terms, for a specified period of time. If the condition isn’t fulfilled by the end of that time frame, the offer expires and the buyer is under no further obligation. Offers conditional on the sale of an existing property solely benefit the buyer and can be a “tough sell” in a good market. You’ll require a very effective salesperson to help you negotiate such an offer successfully.
If you do decide on a conditional offer, and it’s accepted, remember that the homeowners are still free to continue marketing their property to other buyers. While the homeowners cannot accept another conditional offer, most agreements have an “escape clause” that allows the homeowner to accept a firm offer, unless you “firm up” your offer first. This means you remove all conditions and agree to be bound by the terms of your agreement. The original selling price and terms of the offer stay in effect, regardless of what the homeowner may have been offered by another party. The “escape clause” keeps the heat on you to make every effort to sell your home and fulfill the condition in the shortest possible time.
An alternative would be to list your existing home for sale first. Then you know what the proceeds from that sale are and what funds you can commit towards the purchase of your next home. As your professional Real Estate Agent, I can help you weigh the options to decide on the approach that’s right for you.
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