“Sold Conditionally” – What Does It Mean in Real Estate?
Buying a home is one of the biggest financial decisions you’ll ever make. Unlike most purchases, real estate transactions don’t come with a return policy. While some homes may include limited warranties, they won’t cover everything.
So, how can buyers protect themselves before committing to a home purchase? The answer lies in conditional offers.
What is a Conditional Offer in Real Estate?
A conditional offer allows a buyer to secure a property while keeping the flexibility to back out if certain conditions aren’t met. This ensures due diligence before making the purchase legally binding.
How Do Conditions Work?
A condition in a real estate offer is a contingency that must be satisfied before the sale becomes firm. If the condition is not met, the buyer has the right to walk away from the deal and have their deposit returned. A condition has a specified expiration time and date for when the conditions must either be waived/satisfied or the deal is null and void.
Example: Condition of Financing
One of the most common conditions is the financing condition. This gives the buyer time (typically 1 to 5 business days) to secure mortgage approval from their lender.
If the mortgage is not approved, the buyer can cancel the contract without consequences and have their deposit returned.
Who Benefits from a Conditional Offer?
Most conditions in real estate deals are designed to protect the buyer, but in some cases, sellers may also include conditions in their offers.
Buyers Benefit By:
✔ Reducing financial risk – Ensuring mortgage approval before committing.
✔ Inspecting the home – Avoiding unexpected repair costs.
✔ Reviewing legal documents – Ensuring the condo or home is financially sound.
Sellers Benefit By:
✔ Securing time for a new purchase – If the seller is buying another home, they may add a condition based on their own purchase approval.
✔ Minimizing risk in uncertain markets – Conditional offers can allow sellers to evaluate their next steps if market conditions are shifting.
Why Are Conditional Offers Rare in Competitive Markets?
In hot real estate markets like Toronto, sellers often reject conditional offers in favour of firm offers with no conditions.
Why? Because in a competitive seller’s market, multiple buyers compete for each property, and a firm offer with no conditions is more attractive. When a seller accepts a firm offer, the deal becomes legally binding immediately.
Conditional offers, on the other hand, allow buyers to back out of the deal, making them less appealing to sellers.
Most Common Conditions in a Real Estate Offer
While buyers and sellers can include any condition in an offer, the three most common conditions are:
1. Financing Condition
📌 Protects the buyer by ensuring they receive mortgage approval before finalizing the purchase.
📌 Typically lasts 1 to 5 business days.
2. Home Inspection Condition
📌 Allows the buyer to hire a certified home inspector to assess the property’s condition.
📌 Ensures there are no major structural issues or potential concerns.
3. Status Certificate Review (For Condos & Townhouses)
📌 Applies to condos and townhouses that belong to a condo corporation.
📌 A real estate lawyer reviews the status certificate, which outlines:
✔ Financial health of the condo corporation
✔ Any pending lawsuits or legal matters.
✔ Maintenance fees and potential future increases.
Final Thoughts: Should You Include Conditions in Your Offer?
Whether or not to include conditions depends on:
✅ Market conditions – Is it a buyer’s market or seller’s market?
✅ Financial security – Can you afford to take a risk with a firm offer?
✅ Property details – Are you confident in the home’s condition?
Need expert guidance on buying or selling a home? 📞 Contact us today for personalized real estate advice and market insights!