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The Importance of Adding "Subject to Financing" to Your Home Offer

Writer's picture: Brandon NishiBrandon Nishi

When making an offer on a home, buyers often focus on the price, location, and condition of the property. However, one critical aspect that can sometimes be overlooked is ensuring the offer is contingent upon securing financing. Adding a "subject to financing" clause to your offer can provide crucial protection and peace of mind throughout the home buying process. Let's explore why this clause is essential and how it benefits both buyers and sellers.


Understanding "Subject to Financing"

A "subject to financing" clause in a home offer means that the purchase of the property is contingent upon the buyer being able to secure suitable financing. If the buyer is unable to obtain financing within a specified period, typically outlined in the contract, they have the option to withdraw from the transaction without facing penalties.


Importance for Buyers


1. Financial Protection: By including a "subject to financing" clause, buyers protect themselves from the risk of being contractually obligated to purchase a property they cannot afford. If financing falls through, the clause allows them to exit the deal without forfeiting their earnest money deposit.


2. Time to Secure Financing: The clause provides buyers with a window of time to secure a mortgage that meets their needs and budget. It allows them to shop around for the best loan terms, interest rates, and lenders without feeling rushed or pressured.


3. Negotiation Leverage: Including a "subject to financing" clause gives buyers negotiation leverage. Sellers may be more willing to accept a lower offer or make concessions knowing that the sale is contingent upon the buyer securing financing.


Benefits for Sellers


1. Certainty of Sale: While a "subject to financing" clause provides an exit option for buyers, it also provides transparency and reassurance for sellers. They can proceed with confidence, knowing that the buyer's ability to purchase the property is contingent upon securing financing.


2. Serious Buyers Only: Buyers who include a "subject to financing" clause are typically serious and motivated purchasers. Sellers can have greater confidence in the buyer's commitment to the transaction, reducing the likelihood of last-minute surprises or delays.


3. Opportunity to Explore Backup Offers: If a buyer's financing falls through, sellers can quickly explore backup offers without having to start the selling process from scratch. This minimizes downtime and maximizes the chances of a successful sale.

In conclusion, adding a "subject to financing" clause to your home offer is a prudent and essential step in the home buying process. It provides crucial protection for buyers, allowing them time to secure suitable financing and avoid potential financial pitfalls. For sellers, it offers certainty of sale and peace of mind, knowing that the transaction is contingent upon the buyer's ability to obtain financing. By including this clause in your offer, you can navigate the home buying process with confidence and safeguard your investment for the future.


 

BRANDON NISHI | YOUR MORTGAGE PROFESSIONAL

Questions or concerns? Contact me today!

P: (604) 353-5809



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