It would be great (for sellers!) if every offer to purchase a home came without conditions – but the reality of the matter is that most sales come with at least one or more “conditions” (stipulations, requirements, etc) that must be satisfied in order for the sale to proceed to closing. Most of these conditions have a relatively short life time (most are cleared up within the week) but some can last longer, up to or past the date of closing.
So what are some common conditions to expect when selling your home – and what should buyers be asking for when submitting offers? Below are some of the most common conditions as well as a few others to think about.
Before I get started, as a buyer, it’s always good (and prudent) to protect yourself but – in a market or even just a specific property where there is high interest – asking for too much may hinder your chances of having your offer accepted – it’s always best to discuss all aspects of a potential offer with a qualified REALTOR®.
Probably the most common condition in a sale of a property is a clause that states something to the effect of “sale is conditional on the buyer being able to afford the house (by way of getting a mortgage commonly)”.
Now buyers put this in most commonly because they want to make sure the lender approves the home that they are purchasing, just to make sure that it isn’t being bought at grossly over market value or some other legitimate concern (remember if you don’t make your payments, the property/house is the collateral for the loan).
As buyer, this is why your REALTOR® should be ensuring that you are pre-qualified by a reputable lender (bank, broker, etc) before going to see houses.. if you aren’t it’s common for some REALTORS® to insist you get that before showing you any properties, others like me may show you a few during a single outing but make that a requirement before any future outings occur.
Because buyers are (or should) be pre-qualified it is generally a quick process to fulfill this particular condition. Your lender will want a copy of the sales contract and a copy of the property details so they can run a quick check through a (normally automated..) market analysis tool to make sure it isn’t grossly overly valued. In some instances the lender will want some justification (unique property, inability to properly automate comparables) and in rarer instances will want time to send out their own appraiser (more common before automation of analysis came about).
Usually the requirement to send out an appraiser will only be on the most unique or over valued properties so if as a buyer you are contemplating a property like this just be aware of the additional expense (a few hundred dollars likely).
It benefits everyone to know that the buyer(s) are pre-qualified.. it makes sense for the buyer to request such a condition and it shouldn’t scare the sellers. Fact of the matter is, if you have that concern as a seller removing the condition or not shouldn’t help – if the person can’t come up with the funds the house isn’t selling so you probably shouldn’t accept that offer to begin with!
So the home inspection, let’s talk about that for a bit. A home inspection is a great tool for ensuring that as a buyer you know what you’re getting into and as a seller – provided you have disclosed everything you know about – this isn’t a condition that should scare you.
The fact of the matter is this: Anything that is apparent by simply walking through/around the property – say a broken window just for something completely obvious – should be taking into account when picking a proposed purchase price. The home inspection is meant more for a qualified professional to inspect for signs of or other items that may not be obviously apparent to an average person simply walking through/around the property (salt stains on concrete indicative of past water, age of a home being an indicator to ask questions about the plumbing, wiring, etc). If anything comes up, a leaky pipe, etc those can all be (in my opinion) legitimate concerns that may be cause for renegotiation or even termination of the agreement. If the buyer thinks they can use the home inspection as a simple shopping list to try to reduce the purchase price after the fact that is (in my books) a big no no.
So if this possibility for altering the price or cancellation exists why should sellers be OK with allowing it??
There are two categories to put the possible concerns into: legitimate or nit-picky. Having qualified REALTORS® on both sides of the transaction can help mitigate the nit-picky items from causing issue.. and the legitimate concerns were probably going to come up and some point anyway – no point in shying away from them, they either get dealt with during the current offer you are working through or before the next one comes in.
Common conditions that benefit the buyer
I’ll just run down a couple of other conditions you’re likely to see that sometimes are included at the sole benefit of the buyer:
Conditional on sale of buyers property
If you already live in a home, chances are you don’t have the spare cash to buy 2nd out outright. Normally your lender will give you what’s often called a “bridge loan” so that the two dates don’t have to exactly line up it is common to see a condition that says “I need the money from the sale of my house in order to buy your house so I’m only agreeing to buy your house if someone agrees to buy mine.” This one can get pretty complicated when you imagine a series of sales all stringing together like this one after the other… a sale conditional on a sale conditional on a sale that’s conditional on a sale.
Conditional on the buyer getting insurance (acceptable to them)
Similar to the financing condition but less seen due to most home resales being of the subdivision type. Usually you’ll see this only for older homes, or homes that are abandoned.. a lender will want to make sure that the property is insurable so it’s likely your mortgage documents have this clause and so it normally isn’t needed in the real estate deal. The difference being that your mortgage will require you to have insurance .. when included in a real estate deal it normally includes the wording “acceptable to the buyer” which is where the protection comes in.
Common conditions that benefit the seller
There are conditions that can be included for the sole benefit of the seller such as..
Sale of property conditional on seller successfully purchasing a property
Same as the buyer condition just in reverse! In a tough market where homes are selling quickly and the prospect of having a place to go may be in question you may see this condition entered from time to time.
Buyer is aware of possibility for X, Y or Z
Backing onto fields is nice because you have no rear neighbour.. but what about when the city needs to expand it’s housing options? If there is even the slightest possibility that the property could be adversely affected by a future change (high rise condo being constructed, in front of where you just bought an upper unit in an adjacent high rise condo, farms being converted to housing, or even flight paths changing if the house is somewhat near an airport!) Including a condition where by the buyer acknowledges that the possibility of X, Y or Z happening in the future and not holding the seller liable for any such happenings after the fact can save you a potential head ache even years down the road.
There are a lot of “What IF??” scenarios to consider when buyer or selling real estate.. sellers that think they’re going to save money by doing a for sale by owner may not be properly protecting themselves and wind up with larger (legal or other) bills down the road than the realty fees would have been. Buyers – knowing what conditions it makes sense to include in the current market so that your offer is as strong as it can be may be the difference between getting the property or not!