When “Subject-Free” Means “Too Good To Be True”

Ever hear of the phrase “subject-free?” In the world of competitive real estate, what you have here is a concept that is commonly used. But this does not mean that it always leads to positive action. Simply put, a subject-free offer can be made by someone who is interested to avail of property, old or new.


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So, What Does Mean “Subject-Free”?


When a buyer makes such an offer, he will be legally obligated to proceed with the transaction should the seller accept the offer; basically, there’s no backing out of this one for whatever reason. Even if the buyer fails to get the necessary financing for the purchase, he must push through with the arrangement lest face legal action.

A mortgage broker can find you a suitable property to invest in and if this is a hot property you’re dealing with, chances are other people will be vying for the same lot. Most of the time, multiple buyers will engage in a bidding war.


When this happens, a sizeable subject-free offer becomes highly appealing to the property seller because a buyer cannot change his mind and walk away. What the seller has here is a sure thing.


When it comes to subject-free offers, the buyers can entail a number of risks. For one, the property might not be as wonderful as it was marketed to be. Say you have a reputable mortgage broker by your side and you have been pre-qualified for financing, the latter might not push through if the bank assesses the property and doesn’t see it as a bankable investment.


Case in point, you lose your financing and lose your deposit on the property. In some cases, you might also be obligated to pay damages because by accepting your subject-free offer, the seller lost out on other opportunities to make a sale.


A number of people mistakenly think that pre-approval is a guaranteed thing. Being pre-approved for financing means that your application’s been received and your financial history checked and cleared.


But this is not the same thing as having approved funding. You will only be guaranteed or financing if both you and the property have been assessed to be justifiable risks for the lender.


Another issue that subject-free offers can lead to is overvaluation. For those who bid for property, they might offer an amount that is too much for what they will be getting. It won’t be an issue if you have cash. But if you will be borrowing from a bank, you will only get an amount that is within the appraised value of the property. If you can’t cough up the difference, you’ll have trouble in your hands.


But there are ways to control the risks that come with such types of offers. Aside from working with a trustworthy broker and reliable bank, you should make an effort to do your own research on the property. Dig up all of the information you can so that you will be able to make a sound judgment on the lot. Also be mindful of any other risks you might encounter, both legal and financial.