Buying a home is a big deal. For many of us, a good percentage of our life savings will be wrapped up in the equity we have in our houses. Our home is our nest egg, our retirement plan, our family’s comfort, and our peace of mind.
As a result, we want to be protected in a home purchase. We want to know that there is nothing wrong with the property and that everything will work once we move in.
Of course, we also want to know with absolute certainty that we have the financial backing to complete the transaction.
What Is An Offer Condition?
Offer conditions are provisions that may be included in an offer to purchase a home.
Initially, these conditions are customarily included by a buyer who is presenting a seller with a document outlining what they wish to pay for the property. This document is known as the Agreement of Purchase and Sale, also called an offer.
A condition included in such an offer protects a home buyer because it allows time to research and perform due diligence on a property.
It is also possible for conditions to be included for the purposes of protecting a seller. Upon receiving an offer to purchase, a seller may counter that offer and include conditions of their own.
In the case of a buyer, most will want reassurance that the critical systems in the home like heating, plumbing, and electrical are fully operational and functioning well.
In order to protect their interests, in this example the buyer would include a home inspection condition in the offer to purchase.
Together, the condition and the time associated with it are designed to allow sufficient time to investigate the critical systems and structure of the home. The assessment of a house itself with a professional home inspector usually lasts 2-3 hours.
Allowing time for scheduling, a buyer would typically need 5-7 days to complete their due diligence for a home inspection condition.
Once the home inspection is completed and the buyer is satisfied that there are no areas of concern, the condition is considered fulfilled. The purchaser would then sign a document indicating that the condition has been satisfied.
The form used is either a waiver or a notice of fulfilment. Your REALTOR® will provide you with the correct document to sign.
Once the buyer has signed this form, assuming no other conditions remain, the offer is now considered firm and binding. In most residential transactions, an offer is not yet binding if there are conditions that have yet to be satisfied.
Buyers can add all sorts of conditions to an offer. Many purchasers will include a financing condition, for example, allowing time to reconfirm that their lender is ready, willing and able to provide a mortgage in the appropriate amount and according to agreed-upon terms.
Purchasers can also include other types of conditions. If a buyer wants to put an offer on a property but their own home is not yet sold, for example, they may include a condition for protection. To do this, buyers may have their offer to purchase conditional on the sale of their current home.
To protect your interests, your REALTOR® will usually recommend that you include conditions for all areas of concern.
As a client, you should be informed by your real estate professional which conditions to consider including in an offer. Equally important is for your REALTOR® to make certain you fully understand the consequences if you choose not to do so.
Why might you decide not to include conditions? Most commonly this would happen in a multiple offer scenario in which more than one buyer is trying to purchase the same property as you.
Particularly in this situation, conditions included in offers may be perceived negatively by a seller. Faced with what may be several offers on their home, price aside, a seller may simply opt for the bid that has the fewest conditions.
Thus, it’s important that you decide well in advance what your dealbreakers are.
Consider carefully the issues that are most important to you. This way, if you are faced with a multiple offer situation you already know which conditions you will include in any offer, regardless of the outcome.
You will know they are your dealbreakers because you choose to include the condition despite knowing you may lose the house to another buyer.
REALTORS® are well versed in the offer process and understand how to navigate a multiple offer situation. Before deciding whether to exclude conditions in your offer, be sure to listen closely and consider the implications carefully.
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