Subject free madness

There is no doubt that we are in a sellers market here in the Kelowna area, with limited inventory available at certain price points and multiple offer situations happening on many properties.  

With unconditional offers now the new norm in the Vancouver market, will this madness move into the Okanagan this spring? If so, what do you need to know as a buyer if you are considering placing an unconditional offer because you find yourself in a bidding war over a property?

You could be the most well-qualified purchaser in history. Stellar credit, great income, and job stability with a significant down payment, but in the end a lender could still decline your request for financing.

As a mortgage broker, I would never recommend a subject free offer under any circumstance if you are going to require financing to complete the purchase of your home. There is no way any mortgage broker or lender could give you 100% confirmation that your financing will be approved prior to a lender review.

Here’s why – mortgage financing approval not only includes the lender being happy with your qualifications, they must also approve the property. Essentially, it’s a two-step process. The lender requires the specific property details before they can give you a final approval for the financing. There is a very real possibility that they could decline your financing.

Depending on how much you are borrowing, the lender may require a full appraisal of the property, which will be reviewed by their internal appraisal department. The final mortgage approval hinges on that satisfactory review.

Here are some of things that they will be looking for in the review:

What is the remaining economic life of the property (not the physical age of the property)? Has the home received ongoing care and maintenance or is it in poor condition and might not remain standing for much longer? This number can vary greatly from property to property. You might think it’s a steal, but a lender may not be interested in the property because of the current condition.

Was the home a former grow-op? Even if it has been remediated, most lenders are not interested.
Does the home have aluminum wiring or an underground oil tank that has never been removed?
Is the property on leasehold land? Many lenders will not lend on this type of property.

These are just a few of the things that a lender will consider during the property review. Some lenders may support an automated value of the property, but that is not really as common as believed.

Your best course of action is to be prepared. Ensure that you have completed a full pre-approval with an experienced mortgage broker so you are prepared for a possible multiple offer situation in a sellers market. This should be a very detailed conversation.

If you decide to move forward with an unconditional offer on a property, at the very least include a condition for a property inspection.

Let’s hope we don’t find ourselves quite as crazy as the market in Vancouver.

Questions or comments, please email [email protected]

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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. She has been assisting clients to purchase, refinance or renew their mortgages for over 20 years.

April has experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution and as a licensed Mortgage Broker. By specializing in Strategic Mortgage Planning she has the tools available to build a customized mortgage plan, with the features and options that meet your needs.

April provides a full range of residential and commercial mortgage financing options for clients all over the province of British Columbia and across Canada through the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 888-561-2679.

Website:  www.reddoormortgage.com

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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