So the house you just inquired about is conditionally sold, 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 still shows up on Realtor.ca? Ever wonder why some conditionally sold homes are still available to view, but others aren’t? I will try to explain it here.
When buyers make an offer on a home, they usually have strings 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 Buyer Property Sale.
Here is the explanation of what each condition means and the normal timeframes for each.
1. Conditional on Financing. The homebuyer is not paying cash for the property and must take out a mortgage with a lender, be it a bank, a credit union, or a legendary rich uncle. The lender needs time to make a decision based on the buyer’s creditworthiness and ability to pay, as well as the property itself. Some lenders can do this relatively quickly and others take longer. Banks usually take longer than the rich uncle. Generally the times are not more than 10 days.
2. Conditional on the Home Inspection. The buyer hires a home inspector at their own expense (approximately $400) to inspect the house. Again, generally no more than 10 days.
3. Conditional on 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 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 one. The duration of the condition can be anything, but it is usually 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 home seller 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 term 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 use of an escape clause 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 typically accept a week or even up to two weeks for a buyer to arrange financing and an inspection, but are loath to wait 2 months for a buyer to sell their home, so escape clauses are typically only used for the sale of the buyer’s property conditions.
Homes with offers on any condition can still be shown to potential buyers, but without an escape clause in the existing offer, what’s the point? Most brokerages stop showing once a house 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’ll see that house conditionally sold.