Bidding on a home subject to financing

We wish everyone a safe and responsible purchase. In a seller’s market and overheated housing market, the pressure on home buyers really increases. The owner or broker can ask you to make an offer without financing reservation. In Dutch this is called: Onder voorbehoud van financiering.

Of course when you do not want to miss out on your dream home, you can opt to buy a house without a financial clause. At Bliss we have seen this happening with increasing frequency in the current housing market. It makes it makes your bid more appealing, but there are risks involved and is not always a wise move.

What does that mean for you and how do you approach this subject to bidding on a home? Find out what buying without a financing condition means exactly, and what the risks are. This way, you’ll know if you’ll be able to bid without a financial clause.

Consideration points for financing reservation

Why is bidding on a property subject to financing important?
What are the risks of a buy a house without financing?
Why is the seller selling to someone without financing?
This is how you buy a house without reservation of financing
Opportunities and possibilities subject to financing

1. Why is bidding on a home subject to financing important?

Is it a good idea to buy a home without any reservation of financing? That is almost always not the case, but it depends on your financial position and personal situation. It is therefore important to know why such a caveat is important.

When your offer on a house has been accepted, the selling broker will usually draw up a draft purchase agreement. The buyer and seller draw up a purchase contract together. This important document contains all the conditions for the sale, such as the purchase price and important deadlines around the date of the bank guarantee and the date of delivery). The contract also contains resolutive conditions. Based on certain circumstances, these can provide a trigger, so that the sale does not go through. The financing condition is one example of this, it is even included as standard in most purchase contracts. However, recording is not required by law. In practice, we increasingly see that the financing reservation is not included.

A financing reservation gives you as a buyer until a certain date (usually 6-8 weeks) to finalize the financing for a certain amount. The purchase price is usually included for this. If it is not possible to complete the financing during this period, the purchase can be canceled by the buyer. Without having to pay the sellers a hefty compensation. A useful escape route, for several reasons. You can cancel the purchase without clothes ripping.

When you make an offer, you do not yet have absolute certainty about the financing of the new home. Obtaining the desired mortgage is not always possible. The assessment is in the hands of the lender and sometimes an application will be rejected. For example, you cannot get the mortgage because the merchant thinks your income is too low to be able to pay the monthly costs of the house. An irresponsible mortgage and excessive lending is a mortal sin for a bank. The lender may also not want the home as collateral for a loan. There can be various reasons for this, for example because it is currently rented out, is located on an industrial site, there is something wrong with the destination, foundation or architectural condition. When changes occur in your personal situation, these can thwart the financing. You can think of certain obligations in the form of a loan that you are not aware of, but also loss of work, separation, long-term illness or an accident at work.

The three days reflection period that you as a buyer have by law are usually far too short to determine this. .

2. What are the risks of buying a house without financing?

If you buy a house without financing, you are taking on a major financial risk. If the sale does not go through, the seller can still hold you to the purchase contract. The law stipulates that the purchase will only be canceled if you compensate the seller for the damage. The compensation that is included in the purchase agreement for this is usually 10% of the purchase price. That is a significant amount for everyone.

3. Why is the seller selling to someone without financing?

Deleting this resolutive condition gives the seller more certainty about the sale. After all, especially buyers who are sure that they will get the financing around or bring their own money will make an offer under these circumstances. If the sale does not go through, the seller will also receive financial compensation for the delay in the sale process. The seller benefits from having as much trust as possible. The person is often also involved in financing the next home. In this regard, there is a train of people who are buying and selling houses on the house. The more certainty and confidence in this chain, the better it is.

4. This is how you buy a house without reservation of financing

If you know the risks and you have insight into your financial possibilities, you can decide to buy without a financing condition. Please note the following before bidding:

Know your financial capabilities. Schedule an appointment with one of our advisors to map out all risks and your borrowing capacity.
Know the purchase and financing process. This way you know which rights and obligations you have at what time.
Limit your risk. Make sure that the purchase contract states that the purchase is dependent on the outcome of a building inspection. In addition, request a valuation report as soon as possible after your offer has been accepted. Check your details on the website of the BKR for obligations and any (negative) registrations.
Know that you have to pay 10% of the purchase price if the purchase cannot go ahead.

Provide a backup

In practice, we only recommend offering without financing reservations if you can also pay for the house with your own money, or if there is a back-up through family or your own company. With money on hand, any problem can be taken care of. If you do not have these options, you can (also for reasons beyond your control) owe the 10% fine in the event that the financing does not come about.

5. Opportunities and possibilities subject to funding

Are you completely sidelined if you still want to buy with a financing condition? Certainly not! Based on our experience, it appears that sellers often agree to a financing condition. It is important that there is sufficient confidence that the sale will go ahead. By offering the seller as much certainty as possible, you can still positively influence your chances. It is crucial that the seller has an idea of your options and a good preparation:

Ensure that the seller has a good deal. With an (unfair) advantage over the competition, your bid will certainly outrun.
Own contribution = lower amount of financing condition: inform the seller that you will contribute your own money to the purchase. This makes it easier to accept a mortgage loan. As a result, the amount of the resolutive conditions may be lower in the purchase contract.
Shorter term financing condition: instead of 4 to 6 weeks, you can also have a shorter term included. The better you have prepared the financing (with your advisor), the faster your mortgage application will go. Good cooperation with an advisor is important.
Declaration mortgage advisor: ask your advisor to confirm in writing to the seller that the financing is not a problem. Information about your financial wealth increases the chance of accepting your offer. There are various names in the market today for such a statement, such as a mortgage promise.