Top Vancouver Realtor Advice for First Time Home Buyers – Subject to Financing

In Episode 13 of the First Time Home Buyers Guide for Vancouver, we discussed Subject Clauses in general.

Today we’re going to discuss the Subject to Financing Clause in detail and how it relates to and affects a real estate offer. Chad Watts of the Mortgage Group was kind enough to come and talk to us about subject to financing.

What does Subject to Financing Mean?

Subject to financing basically means that a Buyer, for up to 7 days after an offer is accepted, can walk away from or kill the accepted offer if the Buyer cannot get satisfactory financing.

Keep in mind this is a subjective criteria based on the Buyers opinion of the financing as to whether it is satisfactory or not.

Why Do We Use a Subject to Financing?

Like I mentioned in Episode 13, when it comes to writing offers on Real Estate in Vancouver, SAFETY COMES FIRST!

We use the Subject to Financing Clause to protect the Buyer.

This clause gives the Buyer has sufficient time to get confirmation IN WRITING that the financing or mortgage for the property is confirmed.

Subject to Financing allows the Lender an opportunity to appraise the property to ensure the property is worth what the accepted offer says it is and to confirm the Borrower/Buyer can afford to pay the mortgage. Once the Lender has done this, they can give the Buyer/Borrower confirmation in writing that the financing or mortgage is approved.

Check out this great explanation of how subject to financing works.

How to Identify the Subject to Financing in the Offer

To identify the subject clauses in an offer look for clauses that start with “Subject to…”. The Subject to Financing clauses can be as simple as:

“Subject to the Buyer receiving and approving suitable financing on or before _(date)_ . This subject is for the sole purpose of the Buyer.

The subject to financing could also include details about the financing including payment amounts, amortization, and mortgage term.

How Long is the Subject Period after the Accepted Offer?

Its usually 7 days. This is the time it normally takes a bank or other lender to appraise the property to ensure it is worth what the accepted offer says its worth as well as to satisfy the bank/lender of the Buyer/Borrowers ability to pay the mortgage.

This time can be shortened or lengthened in a negotiation based on the Buyers and Sellers needs, but its advisable for a Buyer to first consult with their Lender before agreeing to a shortened Subject Removal period.

Stay tuned for Episode 15 of the First Time Home Buyers Guide for Vancouver when when we will discuss Subject to Inspection!

Never Sold a Home Before? Need Advice? Check out thee informative Videos on How to Sell a Home in Vancouver!

Thinking of Buying a Presale Condo? Have a look at these great videos on How to Buy a Pre-Construction Condo in Vancouver!

I STRONGLY ENCOURAGE QUESTIONS & COMMENTS BELOW!!

What is an Offer that is Subject to Financing?

This is an Offer to buy a property that is “Subject To” or conditional upon the Buyer getting a mortgage within a set period of time, usually one week.

In plain language, the Buyer and Seller agree to give the Buyer  a week to get a mortgage and if the Buyer cannot get a mortgage in that time, the Buyer can walk away from the deal with nothing lost.

Why do we make offers Subject to Financing?

Safety! If a Buyer presents an offer to a Seller without a Subject to Financing clause (like with a Subject Free Offer) and the Buyer can’t get a mortgage, the Buyer will have to pay the entire purchase price in CASH!

I don’t know too many people who have several hundred thousand dollars in cash laying about to buy property, so not having a Subject to Financing may put a Buyer in a tight spot involving very expensive lawyers fees…

How do we make an Offer Subject to Financing?

If you’re going to buy property, hire a professional Realtor to help. They should have standard contracts with a Subject to clause for about every single situation that you may come across and will undoubtedly be able to help you prepare an Offer Subject to Financing.

Safety First! When in doubt use a Subject to Financing Clause!

Questions on Offers Subject to Financing? Call 604-763-3136 or EMAIL ME!

I’d love to hear your thoughts in the form of comment down below.

Questions on Mortgage and Property Financing? Check out these Videos on Vancouver Real Estate and Mortgage Financing!

Buying your First Home? Check out these Videos for First Time Home Buyers in Vancouver!