Waiving Conditions - a Risk or Not in This Situation?

[Nir]

Hi All,

A home inspection revealed a few issues requiring repair. My realtor INSISTS that if I want to reduce the price significantly then I must waive all conditions including financing so it is a firm final offer and all the seller needs to do is sign.

I already received a mortgage approval for the initial HIGHER price that the seller accepted a month ago (subject to me arranging financing and a satisfactory home inspection).

My question is: if I WAIVE the conditions as my realtor recommended and offer a new REDUCED price, am I taking a risk that the bank will NOT accept the reduced price for some reason? It doesn`t make sense to me but banks are not that predictable these days.

In other words, should I do as the realtor recommends or to be on the safe side should I still add a condition subject to arranging financing within say 3 days in order to avoid any legal issues with the seller (if for some reason the bank doesn`t approve a reduced mortgage)?

THANKS & REGARDS,
Neil

 

[Lucas]

Hi Neil,

You should NOT lift all your conditions if you expect to reduce the asking price. By lifting your final conditions you will not have any negotiating leverage against the seller. With a firm offer at the current price, what would be his/her incentive to lower the price? Submit an written amendment to the seller with a new purchase price AND an extension of the financing condition. A price reduction due to an inspection may raise red flags to the mortgage underwriter and its better to be safe than sorry.

To help your case, you may want to waive the conditions that have been adequately satisfied, if any. This shows the seller that you are moving forward with aspects of the deal.

Brett`s advice re: presenting the amendment properly is worth implementing.

Good Luck,

Lucas

QUOTE (investmart @ Oct 10 2008, 06:50 PM) Hi All,

A home inspection revealed a few issues requiring repair. My realtor INSISTS that if I want to reduce the price significantly then I must waive all conditions including financing so it is a firm final offer and all the seller needs to do is sign.

I already received a mortgage approval for the initial HIGHER price that the seller accepted a month ago (subject to me arranging financing and a satisfactory home inspection).

My question is: if I WAIVE the conditions as my realtor recommended and offer a new REDUCED price, am I taking a risk that the bank will NOT accept the reduced price for some reason? It doesn`t make sense to me but banks are not that predictable these days.

In other words, should I do as the realtor recommends or to be on the safe side should I still add a condition subject to arranging financing within say 3 days in order to avoid any legal issues with the seller (if for some reason the bank doesn`t approve a reduced mortgage)?

THANKS & REGARDS,
Neil

 

[Nir]

Thanks Lucas, the information really helps!

Sorry, to clarify what I meant is to submit a written amendment to the seller with a new reduced purchase price WITHOUT any condition. (you are right, not waiving the conditions). I understand now that the bank might not like that and my realtor`s advice is unfortunately wrong and I should still include a financing condition in the new offer.

Regards,
Neil

 

[RedlineBrett]

Your agent isn`t wrong here... They are just trying to cut to the chase and get a deal closed.

If the bank has you approved at a higher number and all that is changing is that the price is coming down you need to ask yourself "what possible reason could the bank have to not approve the new loan?" The only reason would be if the findings of the inspection are so disastrous as to materially affect the value of the property so much that the bank isn`t willing to secure the loan against it.

Now, if your lender had approved you presumably they would have sent out for an appraisal and the defects in the property would have been considered in the approval.

If it`s cosmetics or wear items then with an amended price all you are doing is improving your ratios.

This is where you need to make a quick call to your mortgage broker`s cell and ask them if they are ok with moving forward at a lower price. No, you won`t be formally approved until the bank processes the new contract with the new slightly lower price but this is why you have a good broker who understands what is changing and allows you to run your business without holding everything up when your situation is actually improving.

EDIT: If the inspection has found some serious items (like the ones outlined in the post you made the other day) then I would advise you amend the purchase price and waive the property inspection condition but give yourself some time with financing to allow your lender to review the findings of the property inspection. But if all you are doing is posturing for a lower price based on cosmetic or wear items then you don`t really have a good reason not to waive financing.

QUOTE (investmart @ Oct 10 2008, 07:21 PM) Thanks Lucas, the information really helps!

Sorry, to clarify what I meant is to submit a written amendment to the seller with a new reduced purchase price WITHOUT any condition. (you are right, not waiving the conditions). I understand now that the bank might not like that and my realtor`s advice is unfortunately wrong and I should still include a financing condition in the new offer.

Regards,
Neil

 

[Nir]

Thanks Brett, you are right it is the same property with issues outlined in the post I made the other day.

The situation is a little unique and in order to be on the safe side I decided to amend the offer so it still includes a financing condition exactly as Lucas recommended.

I already sent an email to the realtor and mortgage broker about the process following the note from Lucas.

You know what guys, it`s a buyer`s market, why take any risk!

Regards,
Neil

 

[samwei]

QUOTE (investmart @ Oct 10 2008, 09:20 PM) Thanks Brett, you are right it is the same property with issues outlined in the post I made the other day.

The situation is a little unique and in order to be on the safe side I decided to amend the offer so it still includes a financing condition exactly as Lucas recommended.

I already sent an email to the realtor and mortgage broker about the process following the note from Lucas.

You know what guys, it`s a buyer`s market, why take any risk!

Regards,
Neil

one way of doing it is this. Have an amendment drawn up with the reduced price, which you sign and submit to the seller. In addition, you have a Notice of Removal of Condition also drawn up, which you do NOT sign. Submit both of these simultaneously to the seller/ seller`s agent with the understanding that if the seller agrees to the Amendment for a reduced price, that you are prepared to sign off the Waiver of Condition.

But under no circumstances should you remove the financing condition without first getting back the Reduced Price amendment already signed off by the seller.

 

[Lucas]

Good tip Sam...

QUOTE (samwei @ Oct 11 2008, 08:44 PM) one way of doing it is this. Have an amendment drawn up with the reduced price, which you sign and submit to the seller. In addition, you have a Notice of Removal of Condition also drawn up, which you do NOT sign. Submit both of these simultaneously to the seller/ seller`s agent with the understanding that if the seller agrees to the Amendment for a reduced price, that you are prepared to sign off the Waiver of Condition.

But under no circumstances should you remove the financing condition without first getting back the Reduced Price amendment already signed off by the seller.