What is a conditional offer?
A conditional offer is a purchase agreement where the buyer's obligation to complete the sale depends on the satisfaction of specific conditions, such as securing financing or passing a home inspection.
In Ontario real estate transactions, a conditional offer makes the buyer's commitment to purchase contingent on one or more conditions being fulfilled. These conditions allow the buyer to step back from the deal if critical requirements are not met, protecting them from inheriting unexpected problems or financial obligations they cannot handle.
Common conditions include:
- Financing approval from a lender or mortgage broker
- A satisfactory home inspection report
- A satisfactory property appraisal
- Satisfactory title search and legal review
- Sale of the buyer's current property
When a buyer includes conditions in their offer, the seller retains the right to accept, reject, or counter-offer with different terms. If conditions are waived, the buyer removes their protection and is bound to close regardless of what those conditions would have revealed. This is a significant decision that places full risk on the buyer.
Once conditions are fulfilled, they fall away and the contract becomes firm. The buyer can no longer exit based on those terms. An agent working with residential sales agents will guide both parties on timing, documentation, and the legal implications of conditioning versus removing conditions from an offer.