11 Aug What are Condition Periods?

Posted at 17:27h in Questions Answered, Buyers, Sellers by Keylo 0 Comments

Real Estate can be intimidating, especially when you are faced with piles of paperwork and legal procedures. Navigating through the contract stage can be complex and intricate. What happens when you are ready to make an offer on your dream home but you have concerns regarding your mortgage. Will there be any costly repairs in the near future that you won’t be able to remedy? Don’t worry, this is exactly why condition periods exists.

When you submit a purchase offer to the seller of a home, it is paramount that you include any necessary conditions (or contingencies) to protect you from anything that might cause the deal to fall through, giving you the right to withdraw your offer. A conditional offer acts as a contractual stipulation in your real estate transaction that allows you to do your due diligence, manage the risk of false assumptions and protect your interest.

Typically, condition periods last 10 business days but that can depend on a variety of things and it is important to not make this timeframe too short so all of the terms can be satisfied. Waiving the conditions can only be done once the terms have been met and at that time the house will be considered sold. You just bought a house! You can see all the steps of buying on the timeline in BuyMyHomie.com

Table of Contents

Types of conditions

Financing Condition Periods

This is by far the most common and important condition that would typically be included in a purchase offer. It allows a buyer to review the purchase with a bank or lender. The price, qualifications, and state of the property will be assessed in addition to determining the mortgage amount and interest rate you are eligible for. We recommend that you use a mortgage broker to properly locate the right lender options for you before the process has begun.

Alternatively, Keylo’s Edmonton REALTOR® have partnered with Fundible to provide a certified financial-free approval to allow buyers the ability to make an offer without a financing condition. This can be a great option for buyers who wish to speed up the purchasing process and wish to give sellers peace of mind that they are reliable.

Home Inspection Condition Periods

Though a house may appear perfect or structurally intact during an open house or walk through, there may be defects or deficiencies that need to be considered. A home inspection condition provides the buyer with the opportunity to receive and review a home evaluation by a professional before finalizing the purchase.

In the event that there are unsatisfactory results, such as foundational, plumbing or electrical defects, the buyer can take recommendations by the inspector or weigh out the issues on their own . Sole and absolute discretion in the inspection condition gives the buyer the opportunity to either walk away from the deal based on the outcome of the inspection for any reason or request that the deficiencies be remedied by the seller for the condition to be waived.

Appraisal Condition

A buyer may be concerned if they are paying a fair market value for the property. Implementing an appraisal condition can allow a home valuation professional to determine the value of the property. This concludes whether the property worth is equal or greater than the current purchase offer in order to give the buyer peace of mind and additionally, reassuring lenders that they aren’t overpaying.

As a seller, you don’t want to get caught with your pants down when entering into a contract and chance losing a potential buyer by being dishonest about the value of your house. With Keylo Care, you will be given a free, official appraisal so you can appropriately price your home at a fair market value and avoid any surprises when a buyer implements their appraisal condition.

Status Certificate Condition

Only pertaining to a condominium or townhouse sale that is managed by a corporation, a status certificate gives an outline of the condo’s financial health, budgets major repairs and provides any rules a resident may need to follow.

This is a look at potential condo fees, restrictions on pet ownership, and any other stipulations that may be a deal breaker for the buyer. This can be written into the contract, however most status certificates can be accessed through the condo’s website before the offer has been placed.

Inclusion/Exclusion Conditions

This is a condition that can be applied based on negotiations between the buyer and seller to establish a fair deal and to close the sale. The contract should outline any add-ons that were discussed, typically pertaining to any property that will be transferred over.

This could mean appliances, (refrigerator, dishwasher, washing machine) fixtures, a tool shed, barbecue or a television. If there is anything that is to be removed, such as a large tree that is blocking a window or the installed closet unit in the guest bedroom, these need to be specified in the exclusions.

The buyer and seller should work directly with the other to determine these stipulations and properly include them in the contract. A verbal agreement is not binding and should not be relied upon.

Sale of a Home Condition

A condition can be written into the purchase offer to make the final sale contingent on a current property being sold in order to prevent the possibility of the buyer owning two homes they cannot afford. Reasonable timeframes are important to ensure this condition is met. A 30 to 60 days is a common timeline but it can be determined by both parties as to what constitutes reasonable in the specific circumstance.

If the original home is not sold by the agreed upon deadline, the seller is entitled to move on to other potential buyers or the deal can be renegotiated to provide an extension on the deal.

Schedule Conditions

Consult with any other parties involved in the process and review any other elements that may affect the sale or move-in date to outline a schedule. Respect the timelines for your agent, inspector, lawyer, broker and/or lender and include these into the contract. Consider any other schedule requirements that may be needed.

Maybe the seller needs to find a new residence to properly relocate before vacating the house. Perhaps the buyer needs to wait until the lease at their rental property has expired. Are you waiting for a transfer or promotion to go through at your job or need to be granted acceptance for your children by the local school for the new year? These are all things that can be negotiated and included in the contract to ensure both parties are happy with the transaction and operating in good faith.

Title Conditions

Sometimes the seller isn’t completely transparent about all of the details that pertain to the sale. Having a contingency on the sale for the proper disclosure of titles could bring to light marital, financial and ownership status of the home. This can determine if there is a dispute about ownership in divorse proceedings, a conflict of property lines with a neighbor, unpaid property taxes or anything else that could make the sale more complicated than lead on.

Escape Clause

More conditions in a purchase offer aren’t always desirable to a seller who wishes to get a sale completed, but they are sometimes necessary for both parties. In the best interest of the seller, an escape clause can be written into the contract to allow them to keep their house on the market and entertain other offers during condition periods.

Typically 24 to 48 hours, an escape clause would be implemented after the seller receives another offer from an interested party, at which point they would provide notice to the buyer they are currently under contract with to grant them first right of refusal. This gives the buyer 48 hours to consider their risk tolerance and attempt to button down any unfulfilled obligations before deciding to either waive outstanding conditions or walk away.

If the buyer decides to waive their conditions and proceed with the sale, the seller cannot refuse and take the second offer instead, regardless if it is better, because they are legally obligated to uphold their end of the contract and close the deal with the original buyer.

Waiving Conditions

In order to proceed with the real estate transaction, the buyer must satisfy and waive the conditions within the agreed upon deadline. The buyer is in complete control of this step and cannot be ‘strong-armed’ into waiving anything by the seller. Immediately after having any condition satisfied, the waiver should be signed and delivered to the agent or seller.

Backing Out

When submitting a purchase offer on a house and entering into a contract with conditions it needs to be with intent and in good faith. You can be held liable if you are operating without intent. This means that you cannot simply add conditions to hold the house while you determine if you are ready to buy, contemplate if it is the right house or look for something that might be better. Instead, you must actually execute the steps to satisfy the conditions of your contract.

Both buyer and seller are legally obligated to carry out the contract, acting reasonably and honestly in their intentions. Should any of the requirements of a condition fall through, the buyer can back out of the deal and receive their deposit back, without penalty, as long as they had followed the obligations that were agreed upon in the contract. If for any reason the seller were to become aware that you operated in bad faith, there could be serious legal and financial consequences.

Backing out without conditions

The risk of backing out of a purchase offer that does not contain any conditions is important to consider as well. The most obvious result could be losing the deposit you placed on the house, but there are far worse consequences than that. If a buyer were unable to obtain a mortgage rate that could allow them to continue with the purchase after signing an agreement, the seller could sue you for breach of contract or force you to carry out the sale.

The exclusions where you could back out of a contract without legal ramifications could include;

The property was partially or entirely damaged by an ‘act of god’
The death of either party
Undisclosed defects of the property
The seller’s refusal to allow legally legitimate contingencies or addendums
The seller refused inspection or manipulated the results of the inspection
The seller is involved in illegal activity
The seller is proven to be in breach of contract.

Legal guidelines and rules are different everywhere, and so it is important to talk to your REALTOR®, consult a lawyer or do your own research to determine what your rights and obligations pertaining to real estate and condition periods are in your area. The points outlined above are based on Edmonton real estate and eloquently detailed on edmontonrealestatelaw.ca.

In Conclusion

Condition periods in a purchase offer can prove to be one of the most important assets that you can use throughout the process of buying or selling a home. Keep in mind that as a buyer, you may want to keep a light touch. It is important to find a balance between protecting your interests and keeping the sale appealing for both parties – some sellers aren’t interested in too many conditions, or too long of a condition period.

As a seller, you may not want to spend too much time negotiating conditions. Instead, it might be a better move to find a buyer that is more interested in your property the way it is. Sales without conditions can occur if there is a plan to tear down or renovate, so determine what is right for you.

It is paramount that the contract is discussed, agreed upon, understood and carried out to the best of possible ability by both the buyer and seller. Obtaining an agent that can expertly navigate through your legal rights and obligations can save you from any unwanted missteps or complications and ultimately get you the best deal.

Contact Ryan Mracek today to discuss how he can be the agent you need in your upcoming sale or purchase.