What is a clean offer? This term actually has nothing to do with housework. Below, we answer some of important questions about what a clean offer is, how to go about presenting a clean offer, and the risks and benefits of making one.
What is a clean offer?
A clean offer is an offer to purchase a home without any conditions attached to it. Also called a contingency-free offer, a clean offer aims to entice the seller with the promise to buy a home without any caveat that might cause the deal to fall through, which can happen based on the conditions specified in the offer. Conditions, and reasons to renege, may relate to the buyer or seller, and may include conditions like an unsatisfactory home inspection, the buyer’s inability to secure financing, the buyer not being able to sell their current home first, the seller being unable to accommodate a specific closing date, among other things. From a seller’s perspective, the more conditions there are, the greater the chances of the buyer legitimately backing out of the deal.
How do you write a clean offer on a house?
If you’re working with a professional real estate agent, then they will do all the heavy lifting in this regard. As always, the contract is key, so both the buyer and seller should do their due diligence and have the contract reviewed by a lawyer, to ensure they are protected in the transaction. Remember: if it’s not in writing, it never happened.
When would someone make a clean offer?
There are certain circumstances where a non-contingent, clean offer is more commonplace. A seller’s market is one of them. In a seller’s market, demand outweighs supply and buyers are in greater competition with each other, giving sellers the upper hand. This is when you might see multiple offers, bidding wars, bully offers and unconditional, clean offers. The idea here is that, by presenting an offer with no caveats attached, the seller will feel more comfortable and confident in accepting this particular offer. Despite the obvious reward of making a clean offer, it also comes with some risks, so homebuyers are encouraged to discuss this strategy and be aware of the pros and cons.
Can you back out of a no-conditions offer?
In short, no. (Well… sometimes. More on that below.) Generally speaking, the Agreement of Purchase and Sale is a legally binding agreement, and all parties to it are required to follow through. Should the buyer back out of the deal, they may forfeit their deposit and risk being sued by the seller for loss in the value of their property on resale.
For example, if the seller eventually sells their home for a lower price than what the original buyer had promised to pay, they may sue for the difference in price. Let’s say there was an agreement to purchase the house for $850,000. Closing day comes, and the buyers back out. The seller re-lists the home, and the best offer is $700,000. The seller can now go after the original buyers, seeking to recoup that $150,000 loss. The buyer who backed out of the deal may also be responsible for paying the seller’s legal fees, mortgage carrying costs, and any other losses the suffered as a result of the deal-gone-bad.
Backing out of a non-contingent offer
While uncommon, the contract can become null and void for a variety of reasons beyond the contract’s conditions, such as an existing lien on the home, new or substantial property damage incurred before closing, or if the seller has misrepresented the property – however misrepresentation can be difficult to prove in court.
Homebuyer’s due diligence
Ultimately, the homebuyer is responsible for proceeding in a way that they’re comfortable with. For many, this means making an offer that’s conditional on a home inspection, repairs, financing, specifics around existing tenants, a preferred closing date, or in the case of a condo purchase, a status certificate. Work with a team of trusted professionals, including a real estate agent, lawyer, financial advisor and a qualified home inspector – if this is indeed one of your offer conditions.
Have more questions?
If so, you’re not alone. RE/MAX Canada hit the streets in a new video series, to find out just how much (or how little) the average person knows about Canadian real estate, and to offer some answers in the process.
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