In a hot sellers market, you may feel pressure to make some concessions to win over a seller.
When you make an offer on a home, it's standard to throw in some subjects—telling the seller that if the home isn't up to snuff for a variety of reasons, you have the right to walk away from the deal—with all of your cash in hand.
That's all hunky-dory in a buyer's market but as the housing market has moved towards a sellers one buyers are getting competitive—more and more are waiving those subjects, or protections, in order to sweeten their offer and speed the deal through to closing.
You want the house, and the seller doesn't want any hiccups. So getting those pesky contingencies out of the way is a win-win, right?
Of course not!
It's riskier to waive some subjects than others. We set out to discover which are the most innocuous of the bunch—and which are the most terrifying. We asked an expert to discuss the pros and cons of each common contingency, and then we ranked the risk factor of waiving it on a 1-to-5 scale, with 5 being the highest. Remember—these aren't hard rules. Everything depends on your local market, your personal situation, and, above all else, your tolerance for risk.
Don't forget to ask your Realtor's advice before you waive any contingency. All deals are unique, and only a pro who knows you and the market can tell you how to strike the best deals to score your dream home.
Fear factor: 4
This contingency gives you the right to back out of the deal if your home financing falls through. And waiving it can go very, very wrong.
That's because any number of things could happen before your loan's been sent through underwriting and you have the final approval. The lender could decide to lower the total loan amount, spike the interest rate, disqualify you from a certain loan, or a myriad of other "oh dear" situations. If you're locked into a home offer and can't hold up your end of the bargain, you could lose your deposit and leave your self open to being taken to small claims court.
But not every buyer needs to worry as much about financing. Say, for example, you're paying in cash. You won't need the lender, so you won't need this subject. And if your credit is spotless, you're making a solid (at least 20%) down payment, and you've had the same good job for a while, you're also in a better position to take this risk.
Bottom line: Talk it over with your Realtor and mortgage broker and find out just how confident you should be in your financing. But keep in mind: Even with a pre-approval letter, things can still go awry in the final lending stages including the appraisal. That's why we're rating this one high on the risk radar.
Fear factor: 4
The right to get a full, professional home inspection—and flee into the night if new and horrifying info comes to light—is a crucial subject. Even a new house can fail parts of a home inspection so treat this with care.
Without a licensed inspector viewing the property, you can only guess what might be potentially wrong with the home, now or 10 years down the line.
By waiving this subject, you lose the right to make any requests for additional repairs—or to run away—before the deal closes. This is scary stuff, people. Nobody wants to be stuck in a money pit.
If you're still convinced waiving this subject is the only way to win the seller's heart, try finding some neutral ground, like a general inspection subject, which gives you the right to void the contract, but not to ask for repairs.
Bottom line: Unless you know you’re getting a fixer-upper and will have to make repairs anyway, you're gambling by waiving this one.
Title and Property Disclosure Statement
Fear factor: 5
If the opportunity arises to waive either of these, it's time to run for the hills. Abort mission. Just say no.
A title search will churn up all kinds of important info—like who actually owns the home and if there are any liens on the property. It might seem far-fetched, but title problems happen all the time. Waive your right to it, and you might find that along with your new home, you've acquired thousands of dollars’ in liens.
The property disclosure statement is document that the sellers fill out disclosing to you what they know is right or wrong with the property, lots of information here, age of the roof, are there any foundation problems etc. If you find out after buying the home that work was done to the house badly or the sellers knew there was an issue with something major but did not disclose to you this can also give you a legal route to gain compensation.
Contingency: Strata or neighbourhood rules
Fear factor: 1
The strata or homeowners association rules subject lets you get out of the deal if you discover the restrictions don't jibe with your lifestyle (say, they won't allow you to have three Rottweilers or paint your front door eggplant).
Let us be clear: We do not recommend getting to this point on your path to home ownership without asking about the basics of the home you're trying to buy—including HOA or Strata rules. Ask for a copy and read it before making an offer.
Bottom line: Since we think you should do your homework, waiving the strata rules subject seems pretty low-risk.