Condition of a Home Sale
Sellers, you’ve received an offer on your home!
And it includes a Condition of the Sale of the Buyer’s home.
What can this mean for you?
Typical conditions we see with offers these days include a home inspection and/or financing, which usually take a few days to a week given scheduling and time to review details. With condominium properties, we also tend to see one week time-frames with the condition of a Lawyer’s review of the Status Certificate to confirm details about the Condominium Corporation, up to two weeks at most if there are delays in receiving a Status Certificate plus the relevant documents from Property Management.
A Home Sale Condition can be weeks, up to months, as a deadline in which the Buyers must have an accepted, firm offer on their own home by. Home Sale conditions are becoming more frequent and are not to be dismissed without holistic consideration in this market.
Your Realtor can and should find out a) is the Buyer ready to list quickly, b) is the Buyer prepared to list at a supported or even competitive price given current market evaluations and conditions specific to their property, and c) is their Realtor demonstrating clear and prudent motive on behalf of their client in tandem with a strong offer.
Every Home Sale condition should be accompanied by an Escape Clause.
An Escape Clause allows Sellers to continue to market their home - showings, open houses, on MLS, etc. - while the Buyer is working towards selling their own home.
In the case that a Seller receives an offer from a new Buyer superior to the offer they have in hand, the original Buyers have a set amount of time specified in the Escape Clause to either mutually release from their offer so the Sellers can accept the new offer, or waive their condition and firm up the deal. This time frame typically ranges from 48-72 hours. A firm offer of even comparable value to the original offer can be considered superior and is worth considering.
A couple of things to consider.
In a cooler market with a unique home where showings are rare and interest is spare, a strong offer with a Home Sale condition is absolutely worth considering, given your Realtor has confirmed the strong plausibility of a sale on the Buyer’s end given supporting evidence.
In a warm market, however, or even with a property that is seeing strong interest and steady showings immediately from the time of list, tying up your property with a Buyer’s home sale condition is not in your best interest. At that point, it’s possible you could see 2 or more offers and that competition is likely to yield an offer without that condition of reasonable to strong value.
A home that has sold conditionally with a Buyer’s home sale shows on MLS as sold conditionally with an escape clause (SCE), so any further interest knows they would have to bring something superior to Sellers with an offer already in hand. The Buyers become more intentional after this point however they also become a smaller audience, those who are willing to bring you something strong while Buyers looking to negotiate down have already been weeded out.
Buyers more frequently need that sale to ensure they can fund the sale of your home, and if no other parties are stepping up to the plate, that offer is not something to eschew.
There is a risk, with these long conditional time frames, that the Buyers do not sell in time or even lose interest. Your Realtor should be checking in consistently regarding their home sale, should have vetted the motivation of the Buyers beforehand, and should be aggressively marketing your home in the interim to pursue any possible superior offer that could be out there for you.
The risk analysis comes down to your objectives, realistic time frames, the evidence of interest you are seeing from the public and the benefits of the offer in hand, which your Realtor should help you navigate and consider thoroughly.
Buyers, if you made it to this point, some points worth taking away include:
Your conditional offer needs to be appealing in every other way possible.
Be it a closing date that is preferable to the Seller, your price point, a strong deposit to show viability and commitment, and short windows for any other conditions. Say you’re also looking to include a home inspection and finance condition, keep those to a week maximum if possible and have an Inspector tentatively booked before submitting as well. Possibly, you even ask to do a home inspection at your cost before bringing an offer, and/or confirm as much of your financing ahead of the offer as possible.
Your Realtor should be conveying: your listing strategy; that you will be listing competitively especially in a quieter market and/or with a niche property; that you will be on the market ASAP; and pushing for offers ie. available to the public, marketing consistently and available to deal with offers. Your Realtor also should have discussed with you ahead of the offer, including with the Sellers’ representative at the time of submission, possibilities including commitments to reposition your own pricing within certain time frames if necessary and ultimately what your capacity is for the final sale of your home to finance the subject property.
Sometimes, extensions are granted if Buyer’s receive acceptable offers down to the wire and there is still no broader interest on the subject property. Other times, the deal falls through given no acceptable offers or interest manifested for the Buyer’s property and Sellers are back to square one.
Buyers, this condition demands you fight for your case in your offer and in your home sale, and Sellers, ultimately weigh the risks and merits with your Realtor. These deals do occur, and when done right, with happy endings for both parties.
