“Subject to a satisfactory home inspection” is a condition of sale that frequently appears in purchase contracts. Getty Images

Read the fine print

Conditions of sale are a fact of life for homebuyers and sellers alike

During any real estate transaction, buyers and sellers need to understand what conditions of sale are all about and how they can impact both parties.

“It’s important to note that conditions of sale are for the buyer’s benefit,” said CREB® president David P. Brown.

“Often a seller will try to influence the conditions by requiring financing in four days instead of 10 or something like that, but a well-educated REALTOR® shouldn’t allow it.”

While there are no standard conditions of sale, two of the most common are “subject to financing approval” and “subject to a satisfactory home inspection.”

“The key with financing is that it must be satisfactory to the buyer,” said Brown. “If your bank wants 30 per cent down instead of 10, or you can only qualify with a private lender charging 18 per cent, the financing condition will give you an out.”

For the home inspection condition, the buyer can choose whether they want a professional or another individual to perform the task. The result must satisfy the buyer or the condition is not fulfilled.

Another condition that often appears on the purchase contract is what’s known as a special clause.

“This involves making the sale subject to the buyer selling their home,” said Brown. “On the selling side, we put a couple of restrictions on this. The buyer’s house must be on the market within 24-48 hours of the offer, and it must be listed at a realistic price.”

“The reality is that in a slow or regular market, 97 per cent of offers will include a condition of sale. If you won’t accept that as a seller, you probably won’t get an offer.” – David P. Brown, CREB® president

For the seller, the downside of conditions is that they tie up their property for a certain period.

“Some Realtors have buyers who can’t wait on a property,” said Brown. “They may be moving to Calgary for work, so they fly in on Friday and need to find a house by Sunday. In that case, the seller may miss out on a good, solid buyer and get one with credit trouble instead.”

So, should sellers refuse to accept an offer with conditions? Absolutely, if they don’t mind watching buyer after buyer walk out the door.

“The reality is that in a slow or regular market, 97 per cent of offers will include a condition of sale,” said Brown. “If you won’t accept that as a seller, you probably won’t get an offer.”

The one exception is in a hot market where sellers regularly receive multiple offers. In that case, a buyer who is confident in their financing and doesn’t need a home inspection might omit conditions to give them a leg up on the competition.

However, in most cases, conditions are unavoidable and sellers must try to navigate them as best they can.

“My No. 1 recommendation is to discuss it with a real estate professional,” said Brown. “They’ve likely been down this road dozens of times and seen every situation, so they can help assess things on a case-by-case basis.”

For example, if the buyer is putting 30 per cent down, the seller will probably be more comfortable with the financing condition than with someone making a five per cent down payment.

Regarding home inspections, some sellers will pay for a pre-listing inspection to avoid nasty surprises after their house is on the market. That way, they can either fix any problems or adjust the price accordingly.

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