Should the financing clause specify mortgage terms?

HghSsociety wrote: ↑ Any properties I have bought have had a financing clause which read something along the lines of "Subject to the buyer obtaining financing at the buyers sole and absolute discretion"

I can't remember exactly what it said but it was very close to the above. We have has the same realtor for the past 25 years and have multiple properties and they all had this clause wodered this way

transitored wrote: ↑ Hey everyone. Long time lurker, first time I couldn't find an answer without posting. So thanks to you all for all that I've learned from RFD threads so far.

I feel like this should be a simple question, but I'm getting conflicting advice from my realtor and lawyer.

Consider this subject clause in a real estate purchase offer (I'm the buyer, in BC, haven't signed it yet).



Lawyer says this subject is so vague that it is basically unenforceable. Meaning, as a buyer I am not well protected by it because it doesn't put any specific limits on what terms should be acceptable to me. Being self-employed, I don't want to be forced to seek out and accept a private lender's 10% interest rate offer. So the lawyer recommends to include specific mortgage terms such as loan amount, amortization period, mortgage term, and interest rate.

On the other hand, my realtor is adamant that this condition should work as-is and that it's actually good for me because it "clearly says that the offer should be to your satisfaction", and that she doesn't like to include mortgage terms because that would "give the seller more information about your financial situation". But I don't understand what she means by that, I'm not giving the seller the terms of my pre-approval or anything personal, just a list of mortgage terms that could be considered barely-acceptable, such as "20% down, 3 year term, 25 years amortization, max 3.5% interest rate".

I searched, but couldn't find any recommendations for this online. So, how is it usually done? And why would the realtor disagree with the lawyer on such a simple thing? Do sellers really see specifying the mortgage terms in the clause as a negative?

Thanks for any advice.

transitored wrote: ↑ Hey everyone. Long time lurker, first time I couldn't find an answer without posting. So thanks to you all for all that I've learned from RFD threads so far.

I feel like this should be a simple question, but I'm getting conflicting advice from my realtor and lawyer.

Consider this subject clause in a real estate purchase offer (I'm the buyer, in BC, haven't signed it yet).



Lawyer says this subject is so vague that it is basically unenforceable. Meaning, as a buyer I am not well protected by it because it doesn't put any specific limits on what terms should be acceptable to me. Being self-employed, I don't want to be forced to seek out and accept a private lender's 10% interest rate offer. So the lawyer recommends to include specific mortgage terms such as loan amount, amortization period, mortgage term, and interest rate.

On the other hand, my realtor is adamant that this condition should work as-is and that it's actually good for me because it "clearly says that the offer should be to your satisfaction", and that she doesn't like to include mortgage terms because that would "give the seller more information about your financial situation". But I don't understand what she means by that, I'm not giving the seller the terms of my pre-approval or anything personal, just a list of mortgage terms that could be considered barely-acceptable, such as "20% down, 3 year term, 25 years amortization, max 3.5% interest rate".

I searched, but couldn't find any recommendations for this online. So, how is it usually done? And why would the realtor disagree with the lawyer on such a simple thing? Do sellers really see specifying the mortgage terms in the clause as a negative?

Thanks for any advice.

Ask your realtor how many cases they've actually seen in court about cancelling deal due to financing condition.

niche54 wrote: ↑ Technically you can put whatever terms you want in your offer. Whether it gets accepted is another thing.

Generally, a lawyer is going to give the best contract advice (which is what the offer is, a contract). However, the question is then whether the seller will find your offer attractive. So you must live in an area that is a buyer's market. As a seller, I would think 'this buyer doesn't even have financing pre-approval in place, he probably can't actually afford to pay for my place.' The whole point of pre-approval and getting locked in interest rates for x days is so this general financing clause doesn't affect your deal. The clause shouldn't even be a concern from that perspective.

In my opinion, the part that really matters is the lender appraisal. Because that is actually something that the buyer can't know the result of ahead of time. I've actually heard of lender appraisals coming in lower than purchase price in the long ago past and the buyer has two options. Back out of the deal or try to re-negotiate the purchase price.

rob444 wrote: ↑ A "pre-approval" is still not a guarantee of getting the mortgage secured. As you noted, there is the appraisal issue. Or some lenders will not go through all the due diligence (i.e. proof of employment data, proof of other debts/assets, etc) until after the offer is accepted and real mortgage applied for, and the app passes through more underwriting people. Also some life/financial events may happen inbetween pre-approval and applying for firm mortgage that may affect it.

rob444 wrote: ↑ A "pre-approval" is still not a guarantee of getting the mortgage secured. As you noted, there is the appraisal issue. Or some lenders will not go through all the due diligence (i.e. proof of employment data, proof of other debts/assets, etc) until after the offer is accepted and real mortgage applied for, and the app passes through more underwriting people. Also some life/financial events may happen inbetween pre-approval and applying for firm mortgage that may affect it.

End result is a buyer should still always strive to include the financing clause, even if they have a pre-approval in place. Perhaps showing the pre-approval as part of the offer would help alleviate any fears a seller may have.

Of course in a sellers market a clean offer with zero conditions will always be the most attractive. Up to the buyer if risk, no matter how small it's perceived to be, is worth it.