Conditional vs. Unconditional Offers: What You Need To Know.
There is a lot of confusion surrounding conditional and 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 and how they work.
When you make an offer on a property it will either be:
Unconditional
This means the offer is a firm deal once both sides have agreed to the price and closing dates, with no additional stipulations. If you are completely happy with a property and the owner signs your offer, the property is sold.
Conditional
A deal is conditional when both sides have agreed to the price and 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 and the property is back up for grabs.
Conditional Offer Example
You are a first time home buyer and 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.
1. Financing
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 and 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 and 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.
For more information on Status Certificates, read my blog: What Is A Status Certificate?
Waivers
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 and 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 and 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 and 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.
Conditional Clause Example
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 and 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 and 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 and 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 and riskier if you are in a multiple offer situation. The answer to this question is very subjective and depends largely on market conditions.
You can read my full blog.
Length of Conditions: Why Timing Matters
Lara Stasiw • Real Estate Agent & Home Design Connoisseur
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