When you browse real estate listings, you may see one listed as “sold conditional” or “conditionally sold,” and wonder if you can still make an offer. While you can submit a backup offer on a conditionally sold property, you must understand what “sold conditional” means and which conditions are common in real estate. Here’s how the conditional period works when buying a home. Here’s how the conditional period works when buying a home.
Key Takeaways
- A “sold conditional” property means the seller accepted an offer, but the sale isn’t final until the buyer meets specific conditions within a set time
- Common conditions in conditional sales include financing approval, home inspection, and the sale of the buyer’s current property
- If the buyer fulfills all conditions, the sale becomes firm, and both parties proceed to closing; if not, the property returns to the market
- A property that is sold conditional, may still appear as “for sale” online, leading to confusion for potential buyers
Sold Conditional Defined
A home is considered sold conditional when the seller has accepted the buyer’s offer, but the conditions outlined in the purchase contract still need to be met. Typically, the contract outlines a specific amount of time for the buyer to meet the conditions.
Unlike a firm sale, where the buyer and seller have a binding agreement, a conditional sale means the deal could still fall through if the buyer cannot satisfy the required conditions.
Common Obligations on Conditionally Sold Homes
Most conditions are to protect buyers; however, both buyers and sellers can include conditions on a home sale. Here are some common conditions included in a real estate contract:
Conditional on Financing
If you are purchasing a home with a mortgage, a financing condition is essential. The financing condition typically gives you three to five days to secure your mortgage funding. If you can’t get approved for a mortgage for any reason, you may back out of the home offer with no penalty, and your deposit is refunded.
In hot seller’s markets, you may feel tempted to waive the financing condition. However, if you aren’t approved for a mortgage, you may face a legal requirement to purchase the home, which could put you in a difficult financial position.
Conditional on Home Inspection
Many buyers request a home inspection condition, as an inspection can reveal hidden issues that may be expensive to repair. If issues are discovered during the home inspection, you may withdraw your offer without penalty. Alternatively, you can ask the seller to fix the issues or request a price reduction.
Conditional on Lawyer Approval
There are several elements of the purchase and sale agreement that you should have your real estate lawyer review. Firstly, your lawyer will review the agreement to ensure it is reasonable. Secondly, your lawyer should perform a title search to ensure there are no claims or liens on the property.
Additionally, if you are purchasing a condo, your lawyer will review the status certificate, which informs you of any issues with the condominium corporation. Issues could include building deficiencies, lawsuits, or inadequate reserve funds.
Conditional on Home Insurance
As home insurance is typically mandatory for buyers with a mortgage, you may want to make your offer conditional on obtaining home insurance. This is especially important if you are buying an older house or one that requires renovations. If, for any reason, your home insurance is denied, you’ll be able to withdraw your offer without penalty.
Conditional on Sale of Buyer Property
If you are selling your current home to buy a new property, you may consider making your offer contingent on selling your current home to ensure you won’t be paying two mortgages. This is especially important if you are planning to use funds from the sale of your home for the down payment and closing costs of your new property.
How the Conditional Period Works
The conditional period begins the moment both parties sign the agreement of purchase and sale with conditions attached. During this specific timeframe, you must either satisfy or waive the conditions before the deadline.
Waiving Conditions
The process for waiving conditions and making the sale firm requires written notice to the seller that all conditions have been satisfied or that the buyer chooses to waive them. Once this waiver is provided and accepted, the sale becomes firm and legally binding, with limited exceptions for backing out.
Sale Can’t be Completed
If conditions are not met by the deadline, the consequences depend on the structure of the agreement. In most cases, the buyer can choose not to waive unmet conditions, which causes the agreement to become null and void, allowing them to recover their deposit. The property then returns to active status on the market.
What is a Sold Conditional Escape Clause?
An escape clause, or a release clause, may be listed in a real estate contract. It allows either the buyer or the seller to back out of the agreement under specific conditions. Escape clauses typically benefit sellers, who can keep their home on the market and receive additional offers. On the other hand, a buyer may include an escape clause if they need to sell their current home before moving ahead with the transaction.
When one party triggers the escape clause, the other party must meet the conditions and complete the transaction within a specific amount of time, usually between 24 and 72 hours. If they fail, the deal becomes void, and the transaction is cancelled.
Backup Offers on a Sold Conditionally Home
If a home is conditionally sold, you can make a backup offer on it. However, whether the seller can accept your offer will depend on the original agreement they signed.
If the original agreement included an escape clause, and your offer is more compelling to the sellers, they may trigger the escape clause to try to back out of the agreement and accept yours instead. If the original agreement does not include an escape clause, then the sellers must honour it, and they would only consider your offer if the deal falls through.
Bottom Line
A property with a “sold conditional” status has an accepted offer, but the sale is not final, since the conditions must be met by a set deadline. The sale can fall through if the conditions are not satisfied within the specified timeframe.
It’s important to have a qualified real estate agent on your side when buying or selling a home. Let Zolo help you make your real estate dreams come true.
Sold Conditional FAQ
Can a buyer pull out of a conditional contract?
If the conditions listed in the contract are not met, a buyer can back out of a conditional offer. For example, the buyer can withdraw from the contract without penalty if the purchase was conditional on financing and they are not approved for a mortgage.
Is a conditional offer legally binding?
A conditional offer on a property in Canada is legally binding. Both the buyer and the seller must act in good faith to fulfill the conditions and complete the transaction.
What happens at the end of a Conditional Sale?
If the conditions of the transaction are met, the deal proceeds and becomes firm. In contrast, if the conditions have not been met, the deal falls through, and the seller returns the deposit to the buyer.
