At a time when real estate prices are high, competition for properties is intense, and the price of homes seems to continuously and steadily increase, it is more important than ever to ensure that home buying decisions are not motivated by emotions. Emotional purchases tend to lack preparation and often result in submitting firm offers. Although a firm offer can give the potential purchaser an advantage in competing for the desired property, firm offers have significant risks, which can lead to costly issues if the necessary due diligence has not been completed.
The Risks Involved
A firm offer is designed to benefit the seller, who is typically more than happy to forego the requirement for a home inspection and potential repairs that a firm offer avoids. Should any repairs be required to the property, such as the removal of dangerous wiring, the purchaser will generally be left without recourse and have to carry out these repairs at his or her own cost.
Additionally, before making a firm offer, a purchaser must have adequate financing in place. In a hot real estate market, the majority of purchasers forgo conditions such as the ability to secure appropriate financing from a lender or the ability to sell his or her own property.
If a purchaser is contemplating making a firm offer, it is recommended that the purchaser visits the desired property multiple times before making a final decision on extending a firm offer with no conditions. A firm offer can help finalize a property purchase quickly as it often gives the purchaser an advantage over conditional offers, but the risks associated with this type of offer can be costly.
A firm offer can be beneficial for a purchaser who has repair skills, is into do-it-yourself projects, and/or has the money to spend to rectify potential defects, if and only if, the purchaser is aware of the risks associated with firm offers and is 100% certain that he or she will have no problem securing financing.