A conditional offer is standard practice in real estate sales. Simply put, a homebuyer and seller agree in writing to conditions they consider fundamental to an offer being completed. They set dates to either waive or fulfill the specified conditions in the agreement of purchase and sale (APS).

For example, a conditional offer may depend on:

obtaining mortgage financing
a satisfactory professional home inspection report
or reviewing a condo corporation status certificate.

Why to be Cautious About Conditional Offers in Real Estate

Ontario home buyers are bailing out of that conditional offer in record numbers. You’re right to be wary if you make or receive a conditional offer.

Until all conditions are met or waived, the offer to purchase is pending, not final or confirmed. Even then, if a conditional offer includes escape clauses, a buyer or seller can still terminate the deal. Calculate closing costs in Ontario for a confirmed real estate offer.

You could be second guessing the seller’s goodwill if you aren’t careful about wording a conditional offer, and that could disadvantage you financially. Home buyers rarely win in court if a seller decides to keep the good faith deposit.

When Most Home Sales Fall Through

#1. The Suspect Home Inspection Report.

Professional home inspection reports can spot visible (called patent) minor defects and latent defects that can’t be seen by the naked eye. Filling in a seller information property sheet (SPIS) prevents most nasty surprises during a home inspection. But reluctant buyers may use even easily repaired defects to withdraw a conditional offer. Can you cancel due to home inspection deficiencies?

#2. Mortgage Didn’t Materialize.

Buyers aren’t required to be preapproved for a mortgage. Don’t be surprised when a conditional offer fails because a buyer’s ambitions are bigger than their wallet. Sellers don’t usually get to keep the deposit if a conditional offer is subject to financing. But you could amend a buyer’s conditional offer to allow them to find alternate financing or a second mortgage. What a second mortgage settlement lawyer would tell you about refinancing your home.

#3. Market Changed Since a Conditional Offer Was Made.

Conditional offers real estate buyers wrote days or weeks before a local real estate market changed may be way over a home’s fair market value (FMV). Gaps between what was offered and what a home is worth in today’s market (that FMV) can leave buyers looking for a second mortgage or digging deeper to increase the down payment. That conditional offer clause may be their way out. What happens to the deposit if a purchase agreement is cancelled.

#4. Current Home Didn’t Sell.

Buying and selling a home at the same time can be ruinous to an APS, especially if home sales are slow. Regardless of who made a conditional offer subject to sale of another home, not meeting that all-important deadline to sell may force cancellation of a conditional offer.

#5. Unsatisfactory Status Certificate Review.

That nifty condo you liked so much could have major issues. Condominium corporation not setting aside enough for future expenses? Reviewing the mandatory depreciation report as part of a status certificate review is a must when you make a conditional offer. What’s included in the status certificate (see section 76, Ontario Condominium Act, 1998).

Getting Out of a Conditional Offer

Exactly how do you get out of a conditional offer?

Buyers can withdraw their offer when conditions in their agreement of purchase and sale can’t be met. You don’t necessarily need to specify why you changed your mind, but you do need to cancel by the deadlines in the conditional offer. How can a buyer cancel an offer to purchase.

Sellers who accept a lowball conditional offer, but have a 48-hour clause in the APS can force a buyer’s hand. You can’t sell a home twice, but you can accept other offers while a conditional offer is pending. A 48-hour escape clause compels the first buyer to finalize their offer or, if they don’t, lets you move on.

Buyer missed a deadline? Unless the seller agrees to extend by accepting an amendment from their lawyer, the APS is null and void. Not waiving or fulfilling terms in a conditional offer by deadlines specified in the APS is grounds for a seller to cancel the sale. Before you do, talk to a real estate lawyer about whether you can keep the deposit or pass on the expense of reselling your property. Marketing your home while a conditional offer is pending.

Why You Need a Real Estate Lawyer

Adding subject-to conditions to an offer to purchase can protect you from legal or financial claims when you buy or sell a home. Axess Law reviews your agreement of purchase and sale to ensure it has essential clauses every buyer and seller should include. What’s in the APS in real estate.

Your Axess Law real estate lawyer goes over the terms and conditions in the standard offer. If we find contract language that could disadvantage you, we tell you. Your real estate attorney can liaise with the seller’s or buyer’s lawyer to draft an amendment to the agreement of purchase and sale. See the Form 120 amendment to agreement of purchase and sale.

Changing your mind about an offer can cause you financial grief. If you get cold feet, bring your draft or signed agreement to Axess Law. We contact the buyer’s or seller’s lawyer to help you navigate your way through an offer you prefer to cancel or tell you if the cooling-off period for a new condo has expired. Do you have your Tarion notice on cancellation of condominium contract?

Whether you’ve already signed a real estate agreement or are just contemplating it, Axess Law can negotiate to change your contract at the offer, counter offer, or “subject-to” stage. You can’t be forced to buy a home you don’t want, but you may face expensive penalties if you cancel without cause. Prefer to forfeit your deposit and walk away? Your Axess Law real estate lawyer can explain what happens next if the seller loses money reselling their property.

Mortgage appraisals by your lender or a professional home inspection report can change what you’re prepared to offer for a home or land. As long as the buyer or seller agrees, we can amend your offer by mutual consent. Does wallpaper decrease home value?

Misunderstandings about fixtures that usually remain with a home, like kitchen cabinets, or chattels like a garden shed can lead to last-minute confusion. Your Axess Law real estate attorney ensures the agreement of purchase and sale is specific about what the seller will be removing before you take possession. If your agreement is fuzzy on the details, we add them in and forward an amendment to the seller’s lawyer. Chattels and fixtures — what to include in your APS.

You may be liable for extraordinary costs if you miss important dates in your agreement of

purchase and sale. We keep your real estate completion on schedule to prevent buyers or sellers from charging you financial penalties or pulling out altogether. Ask us if your mortgage financing takes longer than expected. Closing documents to bring your real estate lawyer.

Affordable Real Estate Lawyers, Anywhere You Are

Access lawyers for less in the Greater Toronto Area, Ottawa, or by remote video conference. Our flat fee rates are affordable, and all inclusive (excluding taxes, disbursements, and third-party charges). Your final invoice includes no surprises, or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it. You can get independent legal advice, or add a family member to a property for a modest title transfer lawyer fee. Axess Law offers you only the legal services you absolutely need.

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Meet In Person or By Video Conference Call

Axess Law can meet you at any of our conveniently located Greater Toronto Area or Ottawa law offices or video conference with you anywhere you are, 7 days a week. To close real estate transactions the quick and economical way, try our secure, confidential video conferencing software. If you’ve never video conferenced before, we show you how. Dial toll free to 1-877-402-4207 or in Toronto, call our 647-479-0118 lawyer line to schedule day or evening appointments. Pressed for time? Go online with our easy web booking form. We have onsite parking and easy transit access.

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