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Should You Sign an Unconditional Offer to Purchase?

Have you made an appointment to see a property only to find out that it's been sold before you even have a chance to get there? Are you finding that your offers are getting beat out by unconditional offers? 


So, what exactly is an unconditional offer? Well, it's essentially purchasing a home 'as is' and agreeing to purchase it without approval from your lender, insurance provider, or having any inspections completed.


Is it risky? Absolutely! However, if you are extremely familiar with the real estate market and have a savings account that you can lean on if you find there are some problems or your lender backs out, then it might be the right move for you.


Here are a few of the risks you should weigh before entering an unconditional contract:

 

Property Inspection


Without having a property inspection completed, you may miss some serious problems that are unseen to the naked eye. By having a property inspection done, all problems will be found, noted, and give you the opportunity to negotiate the price with the seller or walk away from the deal. A  property inspection will catch asbestos, mold, foundation and structural issues, age and efficiency of HVAC systems, hot water tanks, and much more. 


Title Review


A title review is another extremely important aspect of purchasing a home. You need to be aware of all Rights of Way, Utility Agreements, covenants, etc. that are registered against your property. You also need to be assured that the seller's lawyer undertakes to payout and discharge any mortgages, loans, or liens that are registered against the property. 


Insurance


The chance that your insurance provider will agree to insure a property without a property inspection, is quite slim. It is, of course, a possibility, but it's likely going to cost you a pretty penny as the premiums will be extremely high. Insurance providers want to be guaranteed that what they are insuring isn't going to cost them money.  


Financing


If your lender is unable to fund the loan or can not fund on time, there's a risk that you will lose the home and your deposit. Many lenders will also want to review the property inspection and insurance documents prior to funding the loan, and if you've made an unconditional offer, you might have a hard time getting all these documents together to satisfy your lender. 


5. Under Valuation 


Having an appraisal completed on the property you are purchasing will give you the most reliable idea of what the home is actually worth. If the seller has under-valued the home, this could have negative impacts on you, as your lender will likely lower your approved loan amount, meaning you will need to come up with the difference.


Homes are selling fast and it's hard to keep up with the market these days, so being aware of the risks that come along with an unconditional offer to purchase is extremely important.

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