So the house you just inquired about is being sold conditionally, what does that mean?

Isn’t it frustrating to call an agent about a house only to be told “Sorry, that house is conditionally sold” but it’s still listed on Realtor.ca? Ever wonder why some conditionally sold homes are still available to view, but others are not? I will try to explain it here.

When buyers make an offer on a home, they usually have conditions attached to their offer. Some of the common conditions are Financing, Rare is the offer that is truly “Firm”. I’ve only seen a few. Home Inspection, Home Insurance, Attorney Approval and Sale of Buyer’s Property.

Here is the explanation of what each condition means and the normal timeframes for each one.

1. Conditional to Financing. The homebuyer is not paying cash for the property and must take out a mortgage with a lender, be it a bank, credit union, or legendary rich uncle. The lender needs time to make a decision based as much on the buyer’s creditworthiness and ability to pay as on the property itself. Some lenders can do this relatively quickly and others take longer. Banks usually take longer than the rich guy. Generally times are not more than 10 days.

2. Conditional to the Home Inspection. The buyer hires a self-employed home inspector (approximately $400) to inspect the home. Again, usually no more than 10 days.

3. Conditional to Home Insurance. Home insurance costs can vary widely with different companies. Get an insurance price that is acceptable to you. 10 days

4. Conditional on attorney approval. It is not as common as the other conditions. Same time.

5. Conditional on the Sale of Buyer’s Property. This is the clause that home sellers really don’t want to see in an offer. It means that buyers have not sold their current home and have to sell it before they can buy another. The duration of the condition can be anything, but usually it is not more than 60 days.

The escape clause

There may be what is known as an escape clause in an offer. The escape clause is inserted when the time period for the conditions is longer than the seller of the house wants but is still willing to accept. If there is no escape clause in an offer, the house is essentially off the market during the time period of the conditions. The escape clause means the seller can consider other offers and the person with the original offer has a set time frame to remove the conditions or leave the house alone. The most common instance of an escape clause being used is when the buyer has a condition of sale of the buyer’s property within the offer, although it can be used in any instance with a condition. Sellers generally agree to a week or even up to two weeks for a buyer to arrange financing and an inspection, but are reluctant to wait 2 months for a buyer to sell their home, so escape clauses are generally only used for the sale of the conditions of the buyer’s property.

Homes with offers with any condition can still be shown to prospective buyers, but without an escape clause in the existing offer, what’s the point? Most brokerages stop showing once a home is sold conditional on financing and inspection. Only once a firm sale (all conditions have been waived) does the property leave Realtor.ca.

Remember, an escape clause is the key factor in whether you will see that house that is conditionally sold.