Accepted offer, now what?

Purchasing a home in Winnipeg has never been more challenging. In the early months of 2020 there was a lot of uncertainty regarding Covid-19 and the impact it would have on our lives. Many home owners didn't list their homes for sale that spring/summer, yet it became evident quite quickly that many Manitobans were still looking to buy homes; yet the inventory was very limited. Almost a year later the situation remains the same, and  prospective homebuyers are almost forced to compete in bidding wars.

Conditional Offer
One way that homebuyers attempt to have the most appealing offer is by having the fewest conditions, or the conditions with the shortest timelines. What this means is if your offer is accepted, you have a few days to satisfy a few conditions before you have completely purchased the home. For instance, many offers include an inspection condition or/and a financing condition, and will state how many days it will take to complete the inspection and financing. If the clients are not satisfied with the results of the inspection, or if they are not able to obtain financing,  they can back out of the deal during that window.

Financing Condition
It is still important to have a financing condition even if a client has been pre-approved. The pre-approval provides the buyers with a ballpark range of homes that their income and debt situation could support on paper. The property has not been evaluated, and with the current bidding war situation, homes are typically selling for well over list, and if the insurer or lender orders an appraisal, there is a chance that the appraised value doesn't support the purchase price (see my last blog post for more on this).. Once I have pre-approved clients, it isn't their income that is the issue, it is usually dependent on the property. The insurer (think CMHC) or the lender could ask for an appraisal, and if the appraised value is less than the purchase price, that is the number they will use for the approval, and the client would have to come up with difference between the appraised value and the purchase price in addition to their down payment based on the appraised value. If clients didn't have a financing condition then they would have to come up with the down payment and the additional money, otherwise they could lose their deposit and face legal consequences. 

Once an offer is accepted, this is what happens. We discuss the lender that is the best fit for the purchase, and then we send in the Offer to Purchase, MLS listing and Property Disclosure statement for the lender's review. We also send in a 90 day history of your down payment funds (government rules), a current letter of employment, most recent paystub, most recent T4, (or a two year tax history for self-employed individuals, commissioned sales, or individuals with fluctuating hours). The lender reviews the application (and sometimes documents) before sending off to the insurer if client is putting down less than 20% down. If the insurer approves, then the lender reviews the documents and lets me know if they need additional documents or clarification. If an appraisal is triggered, this can also add a few days, but as you can see there are a lot of moving parts, and having the bulk of documents gathered up front can speed up the process to hit a quick financing deadline.