Subject Free Offer: Breaking Down the Subject Free Offer and How to Do it Safely
The market is hot right now, and we’re back to the days of subject free offers and multiple offer scenarios. So, this blog is breaking down a subject free offer and how to do it safely without getting absolutely screwed.
What is a subject free offer?
A subject free offer is an offer that doesn’t have any subjects on it. No financing subject, no inspection, no subject removal period – it’s just a done deal right when you put in an offer and it is accepted by the seller. Oftentimes subject free offers have the deposit in hand as well to make them even more attractive because then the buyer has money put in to the property that they cannot get back if they walk away.
Basically the subject free offer means that the buyer cannot back out from the property anytime for any reason, and does not have a safety net in case something goes wrong before the offer becomes “firm”. (i.e. they can’t get financing or there’s a huge special levy coming up)
If you’re looking for more details on the basics such as what types of subjects are typically written on a contract, read this post: Real Estate Clauses for Contracts
Why use a subject free offer?
Subject free offers are incredibly powerful and make a statement that “you can put your money where your mouth is” and have no doubts in your ability to complete. For the seller, it means you have a done deal and don’t need to worry about the results of an inspection or whether or not the buyer can obtain financing.
The subject free offer in many cases can save you, as a buyer, anywhere from $10,000-$15,000 in my experience because it alleviates stress for the seller and creates a quicker sale. It’s a done deal right away, and the buyer cannot walk away – which is obviously very appealing to the seller.
What are the risks of a subject free offer?
If you can’t get financing because the lender has a red flag on the building, then too bad. If you find out later there’s mold that’s going to cost you $10K to remove, then too bad. If there’s a special levy that you found out about 1 week after receiving a firm deal, then too bad.
If you don’t do your homework before putting in a subject free offer, then you could be in trouble. Remember, once you put it in and the seller accepts it then it’s a done deal – no turning back. It’s extremely important that if you are going this route that you minimize risk in advance, because if you don’t complete then you could be on track for a law suit.
How do I beat a subject free offer without going subject free?
Usually the only way to beat a subject free offer is to raise your price. If your price is high enough compared to the subject free offer, sometimes what the seller will do is accept your offer pending subject removal, and keep the subject free offer as a back up offer in the case that your deal collapses.
Have your realtor work with the listing agent and try to present the offer in person to find out the home seller’s true motives. Maybe other things like dates are important, or having a family that will love and care for their home move in. If you can find anything that is important to them maybe you can find a way to display more value in your offer and potentially beat out the subject free. It isn’t always about price for everyone.
If you’re looking for more information on subject removal in general, read this blog post: Subject Removal 101
How do I draft up a subject free offer safely?
Do your homework, and have your realtor and mortgage broker do theirs as well.
- Hire a professional realtor with experience in contracts to ensure that if you do write a subject free offer, that you’re still protected and have the proper terms and warrants in your offer despite no subjects.
- Have your pre-approval completed by a professional mortgage broker and make sure they have all the documents they need.
- Have the mortgage broker review the feature sheet, run the numbers (i.e. taxes, maintenance fees), and review the property disclosure statement in advance. If it’s a strata property, make sure there are no red flags on the building in advance.
- If you’re obtaining an insured mortgage, get your broker to make sure that CMHC or your insurer is OK with the subject property.
- When dealing with a strata property, read the strata documents in advance and write in any additional terms/warrants to protect yourself from special levies.
- Read the property disclosure statement and title search in advance to make sure they are good.
- Do a pre-inspection before the offer presentation date to make sure that you’ve really taken a good, hard look at the property that you’re buying and know what to expect in terms of maintenance and/or repairs.
- Given there are any questions that your realtor or mortgage broker can’t answer, make sure to talk to your lawyer or notary in advance!!
- BE PREPARED! Remember, it’s a done deal and once it’s accepted there’s no going back.
Not prepared to write a subject free offer? Wondering how else you can win a multiple offer scenario? Check out our other blog post on what options you have: What To Do When Everything Around You is Selling Subject Free.
Are you looking to buy? Thinking about selling? We specialize in multiple offer scenarios. Whether you’re looking to beat a subject free offer or obtain a subject free offer, we will walk you through a strategy to ensure you end up on top. Call or text us today at 604-765-0376 or email email@example.com
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