The off-ramp

Ahmed and Rachel are urban Millennials desperate to nest.

So, of course, they’ve been trying two things at the same time: to hatch a kid and have a house.

Mercifully this blog will not comment on the first project. When it comes to the second, however, their strategy is a sign of the times. Theses folks have become professional escape artists in a market where – in most places – conditional offers have returned with a vengeance.

What a change from a few years ago when prices were rising, FOMO was everywhere and competition among buyers resulted in cocky sellers, multiple offers and blind auctions. “We tried buying back then,” says Ahmed, “and it really sucked. We got outbid time after time.”

“We gave up,” Rachel told me. “But things are sure different now.”

Indeed. The couple have bid on six houses and bailed on five of them – now intending to close on the sixth. Each offer was conditional on financing, insurance and home inspection. All three of those clauses were accepted by vendors ecstatic to get any offer, while giving the buyers a week or two to mull over their choice, kick the tires, think about things and comparison shop.

After all, with conditions like that, no proof is required that you couldn’t get a mortgage, find an insurance deal or did not discover some flaw with the property. The buyer holds all the cards. The seller, none.

Here’s a typical home inspection contract cause:

“This Offer is conditional upon the inspection of the subject property by a home inspector at the Buyer’s own expense, and the obtaining of a report satisfactory to the Buyer in the Buyer’s sole and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than _____ p.m. on the ______day of ____________, 20____, that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. The Seller agrees to co-operate in providing access to the property for the purpose of this inspection. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller as aforesaid within the time period stated herein.”

In other words, the buyer must waive the condition, or the deal dies. Normally purchasers have five to ten business days to have an inspection done – which could be conducted by a professional, your BIL or just you. Or not at all.

Equally opaque are conditions to gain financing on terms satisfactory to the buyer, or to obtain a commitment to insure the property at a reasonable level and price. Again, the seller is 100% at the mercy of the buyer in these one-sided clauses.

Ditto for an SOP offer – conditional on the sale of another property. In the kind of market we’ve seen for three years now, this is increasingly common since buyers are reluctant to go firm on a new place until they’ve dumped the old one. So an offer might give thirty or sixty days for a sale of their existing home to materialize and during that time the seller keeps the house listed. If a new buyer offers firm, the original purchaser gets time (like 48 hours) to pony up and waive the SOP condition, or the deal dies.

No surprise a lot of buyers are taking this approach.

A new survey shows that so-called ‘failed transactions’ are endemic. The main clause being used by buyers relates to financing with agents reporting a 38% increase in deals falling through for this reason. Also significant are the number of offers failing because buyers can’t sell their existing homes, or at a price allowing them to move up.

Unsurprisingly, agents are saying buyers are risk-averse, unwilling to write offers without conditions and looking for an easy off-ramp if their stomach flips after reading what Trump did yesterday or the boss at work starts talking too much about AI efficiency.

By the way, what are potential buyers truly worried about?

Four in ten say the economy, including the potential of a recession. A fifth are concerned about the stability of their employment. Almost an equal number fret that interest rates will rise. And until any of that changes – not soon – conditional offers will prevail.

Meanwhile Ahmed and Rachel are in fact about three weeks out from actually buying a place. They waived all their conditions.

“And I’m pregnant,” she told me yesterday.

Just when I was ready with advice…

About the picture: “Thanks for your blog – been a daily reader for about a decade now!” writes Jeff. “My partner and I are one of those DINK couples in our mid-30s. Unlike most millennials, that includes pets (when did we start considering them children in society). Gordie photographed below is a beloved neighbourhood cat in Garneau, Edmonton. He would come in every morning, sleep, wake up and ask for a snack, and go back to sleep on my lap as I WFH, before politely asking to leave for the day. Sometimes he would come back in the evening. Leaving Gordie was one of the toughest parts of our move to Calgary 2 years ago (followed closely by leaving the Oilers). Hope Gordie makes it on to your blog! Thanks for doing what you do.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.