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May 2014 - When buying a house make your offer to purchase – conditional on financing

When buying a house make your offer to purchase – conditional on financing

☳ by Adam Aspilla

Some of the writer’s clients lost their hard-earned money for making a firm offer to purchase a house, without a pre-approved mortgage, instead of an offer with condition on financing.


A good example was a couple who made an offer to purchase a house at a purchase price of $425,000.00.They really like the property for it was their dream-house. Since the property was so nice, there were other prospective buyers who were ready to make an offer to purchase the same house.

To be sure that the said couple would get the house, they made a firm offer, though  they didn’t have a pre- approved mortgage. They made a deposit of $20,000.00 to demonstrate to the seller that they are really serious in buying the house.


After they made an offer, they went to their bank to apply for a mortgage, but they were declined for whatever reason. They went from one bank to another but still they were not able to secure a mortgage.

Frustrated, they engaged a service of a mortgage broker, though they got approved, but the interest rate was so high and the cost of arranging the mortgage was so exorbitant (broker’s fee, lender’s fee and bonus) for the source of funds was from a private lender.


Moreover, the private lender was willing to finance only up to 80% of the purchase price. But the couple need up to 90% financing for they could only afford a down payment of 10% of the purchase price.

As a consequence, the couple walked away from the deal, and they lost their deposit of  $20,000.00 and were sued for damages for their inability to close the transaction.


Should a judge would render a judgment for damages against the couple, they are contemplating filing for bankruptcy as their last resort.  It is unfortunate, that their desire to buy their dream-house went down the drain and they were also in a legal bind.


To avoid a bad situation like the above couple, do not make a firm offer in buying a house, unless you have a pre-approved mortgage. Otherwise, make an offer that is conditional on financing.


Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.