Offer Conditions Explained: Protecting Your Purchase When Buying a Home
When you’re ready to submit an offer on a property, it’s common to include conditions to protect your interests. These conditions allow you to conduct due diligence after your offer is accepted, ensuring that you’re making a sound investment. In this guide, we’ll break down what offer conditions are, why they are not simply an “out,” the legal duty of honest performance, and some of the most common conditions used in real estate transactions.
What Are Offer Conditions?
An offer condition in the home buying process is a clause that allows you to complete specific due diligence after your offer is accepted. When an offer is accepted with conditions, it is referred to as a “conditionally accepted offer,” and the listing is marked as “conditionally sold” on the MLS.
Each condition includes a specified timeframe to fulfill it. If everything checks out, your Realtor will prepare a Notice of Fulfillment, which you will sign and submit to the seller’s agent, making the deal firm. If the results of your due diligence are unsatisfactory, you have two options:
- Do not fulfill the condition – The contract ends, and you walk away from the deal.
- Negotiate new terms – You can request changes, such as a price adjustment or repairs, before firming up the purchase.
Buying a home but not sure where to get started? Binge the full Home Buyers Playlist video series for answers to all your buying questions here.
Conditions Are Not an “Out”
Conditions are not designed as an escape route if you change your mind about a property. When you submit an offer, you are legally bound by the duty of honest performance. This means that both parties must act in good faith and be truthful in fulfilling their contractual obligations. If you choose not to fulfill a condition, it must be for a valid reason directly related to that condition.
For example, if your offer includes a home inspection condition but not a financing condition, you cannot back out due to financing concerns. You can only use the home inspection condition if the inspection reveals issues that impact your decision to proceed.
Get definitions for some of the most important home buying terms with these videos next:
Common Offer Conditions
Here are some of the most frequently used conditions in real estate transactions:
1. Financing Condition
A financing condition gives you time to confirm that a lender will approve your mortgage for the property. Even if you have a mortgage pre-approval, lenders still need to approve the specific home you’re buying. This condition ensures that you won’t be locked into a deal without the necessary funding.
2. Home Inspection Condition
This condition allows you to hire a certified inspector to assess the home’s physical structure and major systems. The inspector will provide a detailed report outlining any minor or major issues, helping you determine whether to proceed with the purchase, renegotiate terms, or walk away.
Watch our video all about home inspections right here.
3. Status Certificate Review Condition (for Condos)
If you’re buying a condo, this is one of the most important conditions. Your lawyer will review the condo corporation’s documents, including:
- Declaration, rules, and bylaws
- Reserve fund study and funding report
- Financial statements
- Special assessments (current or upcoming)
- Legal disputes involving the condo corporation
This review ensures that the condo is in good financial health and that there are no hidden risks before you commit to the purchase.
Less Common Conditions
While the above conditions are the most frequently used, here are two additional conditions that may apply in specific situations:
4. Property Insurance Condition
This condition is rare but may be included if there is a concern that the home may not qualify for insurance due to past claims, structural issues, or other risks.
5. Sale of Buyer’s Property Condition
This condition is uncommon in competitive markets like Toronto, but it allows buyers to purchase a new home contingent on selling their existing home within a specified timeframe. If they cannot sell their current property in time, the deal can be terminated.
Final Thoughts
Offer conditions are essential tools to protect buyers, ensuring that you are making a well-informed decision before finalizing your purchase. However, they should not be misused as a way to back out of a deal for unrelated reasons.
Do you have a specific question? I’m happy to answer, get in touch by filling out the form on this page, calling 416-909-9235, or emailing info@yaelandco.com today!
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