There is a lot of confusion surrounding conditional & unconditional offers.
What is a conditional offer?
Do I need to include conditions in my offer?
Can I get out of a conditional offer?
How many conditions can I have?
Whether you are a first time home buyer, haven’t purchased property in a while, or just still have questions, that’s okay! This blog will explain both types of offers & how they work.
When you make an offer on a property it will either be:
This means the offer is a firm deal once both sides have agreed to the price & closing dates, with no additional stipulations. If you are completely happy with a property & the owner signs your offer, the property is sold.
A deal is conditional when both sides have agreed to the price & closing dates, but it is subject to certain conditions. These conditions must be either waved or fulfilled by a given date or the deal falls through & the property is back up for grabs.
Example of a conditional offer:
You are a first time home buyer & have offered $525,000 for a 2 bedroom condo. The seller accepts your offer. There are 2 conditions your agent has included for your protection.
The offer has been made conditional upon you obtaining financing that you are satisfied with. Your agent (me!) has stipulated in the condition that you have 5 business days to do this.
You now have 5 business days to secure financing from your chosen bank or mortgage broker. Once you have obtained financing you are satisfied with, you will sign a Notice of Fulfillment for your financing condition. After the NOF is submitted to the listing agent, your offer is no longer conditional upon financing.
2. Status Certificate:
The offer has been made conditional upon your lawyer reviewing the Status Certificate of the condominium building. The report must be satisfactory to both you & your lawyer. Your agent (me!) has stipulated in the condition that you have 5 business days to do this, upon receiving the Status Certificate from the Condominium Corporation.
You now have 5 business days once your agent (me) receives the Status Certificate for your lawyer to review the document. Once this has been done & you are satisfied with the report, you will sign a Notice of Fulfillment for your status condition. After the NOF is submitted to the listing agent, your offer is no longer conditional upon review of the Status Certificate.
Once both NOF documents have been submitted (you may only sign 1 NOF for both conditions), the deal is firm & the condo is yours! No more anxiously waiting to hear whether your offer has been accepted, if your financing went through or if the building’s financials are acceptable!
For more information on Status Certificates, read my blog: What Is A Status Certificate?
The alternative to a Notice of Fulfillment is a Waiver. There may be a condition included for your benefit that you no longer wish to complete.
For example, it is not common to include a Home Inspection condition for condo units. If you are planning to do renovations, you may have included a clause that your offer is conditional upon a Home Inspection. Once this conditional offer is accepted, if you changed your mind & do not want to complete the inspection, you will still need to provide something in writing to the seller. You would sign a waiver stipulating you are waiving the condition.
The Importance of Wording
It is very important that conditions clearly state who they are for & their time frame. You cannot just state that an offer is conditional upon review of the Status Certificate, but must include who is to review it & when they must review it by. Without a time frame, an offer would remain open-ended for an undetermined period of time which is not beneficial to either party.
Example of a conditional clause:
Did you only read through part of it, skipping over all of the wordy jargon? You aren’t alone.
Reading the small print of an Agreement of Purchase & Sale isn’t fun, but it is important you understand what you are signing.
Your agent should be going through the documents with you so you have a thorough understanding of all the stipulations. If you are still confused & feeling overwhelmed that‘s okay! One of the most important reasons you should use an agent you feel comfortable with is so you’re comfortable asking questions. Sometimes I have to explain things a few different ways before my client fully understands the legalities of a deal. Sometimes even I have to read through something a few times before I fully understand it!
The worst thing you can do is assume you should understand something & be too nervous to ask your question, no matter how small a question it is.
Know what you are signing.
Types of Conditions
You can create a condition for anything you like. You could make an agreement conditional upon you getting a pending deal on new flooring at Home Depot. You could include a condition that the tree in the backyard is inspected by an arborist. While there is no limit to what you can include, there is definitely a limit to what you should include.
The more conditions, the less desirable an offer.
Length of Conditions: Why Timing Matters
Essentially, longer conditions are less attractive & riskier if you are in a multiple offer situation. The answer to this question is very subjective & depends largely on market conditions.
Stay tuned for a full blog post on this topic!
Lara Stasiw • Real Estate Agent & Home Design Connoisseur
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