Steps to removing subject to financing clauses

While I once thought our local real estate market was our collective Kryptonite, I now feel like Vancouverites are all but immune to its wily ways. Afforded front row seats on what turned into a rollicking ride through 2016’s turbulent housing market, it failed to deter the resolute among us. That said, it’s no wonder many of you were left scratching your head and asking questions. From how to safely remove financing subjects after your offer is accepted to how mortgage appraisals work, here are some frequently asked Q&As.

Q: How do I safely remove financing subjects after my offer is accepted?

A: Subjects refer to specific conditions you wish to fulfill before purchasing a home. This could be something as simple as documents from the strata to a full home inspection. Whatever your subjects are, it is imperative that you remember if your offer is accepted, once you remove those subjects you are entering into a legally binding agreement. Only when you have all the documents from the agents, as well as your signed appraisal looked over by your mortgage broker and lender, should you proceed.

Your broker will communicate with you regularly during this process and, once all the lender’s conditions have been met, they will either send you a standard letter to inform you or let you know by phone or email.

During the subject removal period and until your closing, consistency is key to make sure you actually get your mortgage at closing. Deleting savings, applying for new credit and switching jobs are some of the big things to avoid until the ink is dry.

Q: When is it okay not to have a condition removed?

A: Only when you are absolutely sure that you can meet the condition. As an example, let’s say one of your conditions is that you must pay off your visa. At the moment you don’t have the funds to meet that requirement, but you’re 100 per cent certain that you have liquid funds coming in (say, a tax return) and will be able to fulfill your obligation. But if you have any doubt about meeting a condition, proceed with caution.

Q: What happens if my appraisal falls short?

A: When your mortgage broker orders an appraisal (a valuation of the home you are buying), it will be from one of two sources: either an approved lender list or a blind system that the lender requires. After the appraisal is finished, the report will be sent to the lender who then decides whether or not the appraisal is accepted.

If your appraisal comes in short of the mortgage amount, as the buyer it is your responsibility to ensure you have enough funds to complete the transaction. For example, let’s say the purchase price is $500K and you are getting a mortgage for 80 per cent of the value ($400K). Should the appraisal come in at $480K, the lender will only lend you 80 per cent of that amount, which is $384K. So now you will have to find an additional $16,000 down payment in order to keep the same mortgage. If you don’t, you should not remove subjects.

Atrina Kouroshnia is an independently licensed mortgage broker in Vancouver, BC at