A conditional offer is simply an offer to purchase a home contigent upon or conditional upon either the Buyer or the Seller satisfying themselves of 'something' within a limited time period, at which point the offer becomes firm and binding - or falls thru without penalty.
For example, many buyers will add a condition upon their ability to obtain mortgage financing within 3-5 days. This is quite common. At some point within that time period, the Buyer must notify the Seller that this condition is fulfilled (sign a notice of fulfillment form) or notify the Seller that they were unable to obtain financing and therefor will request being formally released from all obligation - and request their deposit to be returned in full without any penalty..
Other common conditions for a buyer may be
- Condition on home inspection and the obtaining of a report that is satisfactory to the buyer
- Condition upon water testing/septic tank inspection
- Condition upon obtaining satisfactory home insurance
Is the Condition Upon the Sale of a Home Back?
Back in the 1990's and right into the early 2000's Buyers would often include a condition upon the sale of their own home. These conditions would be for 30 - 60 days and would allow the Buyer time to see if they could sell their home. If they couldn't sell their home, they wouldn't have to buy the next place. This offered Buyers peace of mind in a very tumultuous real estate market. It also gave Seller's some hope that someone wanted their home and was willing to pay a price acceptable to them.
Well, just this past December we found two homes that sold 'conditionally upon the sale of a purchaser's home' in the Willowdale West area and the good news is that the Buyer's homes sold - which in turn allowed them to firm up their purchases of their new homes. All with their hairs still firmly intact in their heads (for the most part) and without the absolute panic experienced by some as our market shifts into a Buyer's market in some sectors of the city.
What Should Seller's Watch For?
If you're considering accepting an offer conditional upon the Buyer's home selling there are a few critital things to consider;
- Is the Buyer's home in a saleable area?
- Is the Buyer going to price their home fairly to sell?
- Is the Agent who is representing the Buyer, experienced and able to get the home sold?
- You want to make sure your own agent is experiemced to walk you thru this
It is important for you as the Seller to understand that if you accept a conditional offer on the sale of another home, you are essentially taking your home off the market. It is common practice to use an 'escape clause' in the offer that allows the Seller to continue to offer the home for sale - however most Agents will not show a conditionally sold home to their buyer. They understand that the first Buyers have first right of refusal, and that any offer they negotiate for the new buyer, may all go to waste.
What Buyers Should Know
If you're hoping to buy a home or condo conditionally upon selling your own home, it's important to understand a few things to help you plan. First and foremost, a well priced home in a saleable area will still attract a 'clean' offer with the basic financing and/or home inspection conditions. Sellers understand that the 'cleaner' offer is always more acceptable.
- Conditional offers aren't always accepted - especially when the Listed home is new to the market
- Where homes or condos are selling quickly,conditional offers on the sale of a home are likely not going to cut it
- Sellers are more inclined to consider a conditional offer if the offering price is strong
- Buyers must be ready to get their homes on the market quickly - and priced to sell
- You really want an experienced Realtor to walk you thru this
Offers. Staging. Pricing. Timing. Conditions. Mortgages. If you have questions, we can help answer them.
Our best advice is to call us to discuss these ideas and how best to use them to your advantage and success. Our Completely Moving Consultation reviews conditional offers and all sorts of other things - so that you are fully prepared to make the best decisions for your family.