If you’ve bought or sold a house in the Barrie area or you’re in the process of buying your first property, you’ve likely come across the term ‘conditional offer’ before. Although this is a relatively familiar term, many people are not aware of what a conditional offer really is, including the responsibilities and requirements that come along with placing this type of offer on a property.
Conditional offer defined
So what exactly is a conditional offer? A conditional offer basically means that the purchaser offers to buy the property as long as conditions outlined in the offer are met within a specified timeframe. Both the buyer and seller need to agree to these conditions and if the conditions are not met within the timeframe (typically 3 – 7 days), the offer is then considered void and the deposit is then returned.
When it comes to conditional offers, it’s also important to know that although an offer has been placed, the seller is still allowed to show the home to other potential buyers in case the conditions of the offer are not met and the offer falls through.
Common conditions in a conditional offer
There are two conditions that are usually included in a conditional offer. The first condition is financing. A financing condition means that the buyer must secure financing in order for the purchase to happen. Although this sounds relatively straight-forward, it’s important to note that although you may be pre-approved by a lender, the lender may change the amount that you are approved for based on their own appraisal of the property. For this reason, it’s important to ask about the appraisal process when you are considering a lender.
It’s also important to understand that once a conditional offer is placed that includes a financing condition, the buyer must actually take the steps and ‘act in good faith’ to try and secure financing. If the seller thinks that the buyer has not made an attempt to secure this financing, they may choose to take legal action against the buyer.
Another common condition in a conditional offer is a home inspection. This type of condition helps to protect buyers by allowing them to cancel or withdraw the offer based on the results of an inspection on the home or property. Once again, although this condition seems pretty straight-forward, there are requirements and obligations that come along with this type of condition that you might not be aware of. Just as a buyer must act in good faith to try and meet conditions, the buyer must also try their best to meet this condition. This means that the home inspection must be complete and must be conducted by a qualified home inspector.
Sale of Current Home
Making your offer to purchase conditional on the sale of your current home is another common condition. It’s also necessary to include if you will need to use the money you receive from the sale of your current home towards the purchase of the new property. Keep in mind, however, that you’ll need to include a reasonable timeframe to this condition in which your home should be sold by in order to stay competitive and ensure that your conditional offer is accepted.
The more information you have about the real estate buying and selling process, the more informed you will be as a real estate consumer, which also likely means less stress when it comes to buying or selling your home. Working with a professional mortgage broker can also help to reduce your real estate stress and help you find the best mortgage and mortgage rate for you. Email or call me today at 705-315-0516 to learn more about my services and how I can assist you.