Condition-free Offers

RECA’s Mortgage Broker Industry Council (MBIC) has expressed concern over the recent increases of condition free offers reported by mortgage licensees. MBIC is asking that real estate licensees work with their clients to ensure that these offers are really in their clients’ best interests. Remember to encourage your clients to talk to their mortgage broker or their lender throughout the offer process.

In a competitive market, your buyer client may feel extra pressure to tailor their offers to appeal to the seller. In a multiple-offer situation, the client might ask you about making a condition-free offer in order to stand out from the other buyers.

It is your job as a licensee to ensure your client understands this strategy is not without risks.

To start, get to know your client. What are their needs? What are their resources? Have they bought property previously or is this their first time? Will this house be their primary residence or are they looking to flip it? What can they afford? Discussing these factors with your client can help them understand the risks involved with making a condition-free offer, as well as their tolerance for risk. If they have further questions, urge your client to seek legal advice on the matter.

Remember to document that you have had this discussion with your clients and that you have encouraged them to seek legal advice, and include it in your brokerage file.

If after learning of the risks, your client still wishes to proceed with a condition-free offer, it is in their best interest for you to perform due diligence on the property prior to submitting the offer. Areas for you to explore, depending on the property, include completing a comparative market analysis, performing a title search, asking the seller representative about material latent defects or other known facts about the property, and talking to neighbours about known issues regarding the property.

Make sure you document any material information you gathered as well as the advice you provided your client based on the information. Should your client wish to proceed with a condition-free offer immediately, you must obey their lawful instructions. If you’ve performed your due diligence and disclosed all the necessary information, you can be confident that you acted in the best interests of your client.