Isn't it frustrating to call a real estate agent about a property that’s on the market only to be told, “Sorry, that house is sold conditional,” but it still appears on the MLS? Ever wondered why some houses that are conditionally sold are still available to see but others are not?
Ever wondered what does sold conditionally mean?
The Definition of Sold Conditional
“Sold conditionally” in real estate signifies an agreement of purchase between a buyer and seller on the purchase and sale of a property, but with a crucial caveat: specific conditions must be met for the sale to become fully binding. This status is a halfway point between being for sale and being sold.
It's not just an agreement on price, but an agreement contingent upon certain criteria being fulfilled.
Common Conditions on a Conditionally Sold House or Home
When buyers make an offer on a home, they generally have conditions in their offer. Some of the common conditions are financing, home inspection, home insurance, lawyer approval, and the sale of the buyer's property.
Here is an explanation of what each condition means and the normal timelines for each.
1. Conditional on Financing
The homebuyer is not paying cash for the property and must arrange a mortgage from a lender, be it a bank, a credit union, or fabled “rich uncle.
The lender needs time to make a decision based on both the creditworthiness and ability of the buyer to repay the loan, as well as the property itself. Some lenders can do this relatively quickly, often within 48 hours, and some take longer. Banks usually take longer than the “rich uncle.”
Generally, times are not more than 10 business days.
2. Conditional on Home Inspection
The buyer hires a home inspector at their own expense to inspect the house. Again, generally not more than 10 days.
3. Conditional on Home Insurance
Home insurance costs can vary widely with different companies. Get a price for insurance that is acceptable to you. 10 days
4. Conditional on Lawyer Approval
Not as common as the other conditions. Same time frame.
5. Conditional on Sale of the Buyer's Property
This is the clause that home sellers really do not want to see in an offer. It means the buyers have not sold their current home and have to sell it before they can buy another one. The length of time for the condition can be anything but usually not more than 60 days.
What are Your Options if You Find a Home That’s Sold Conditionally?
If you find a home that you really like but it’s sold conditionally, there may still be a (slight) chance that it could end up being yours.
Sale Can’t be Completed
This isn’t common, but it does happen, and it’s pretty straightforward: the original buyer may not be able to complete the purchase because of one or more of the conditions (they couldn’t get the financing, the home failed the inspection, etc.).
The Contract Has an Escape Clause
When a seller accepts an offer from a potential buyer, under the terms and conditions of the deal, the seller is obligated to go through with the sale even if the seller receives another offer on the property.
The only exception to that is when the seller inserts an escape clause into the contract.
What is a Sold Conditional Escape Clause?
An escape clause may be added to the contract when the seller feels that the length of time for the conditions is longer than the seller wants but is still willing to accept.
Without an escape clause, a home is, for all intents and purposes, off the market for the agreed-to timeframe for removing conditions.
With an escape clause, the seller may look at other offers, and the original buyer has a set timeframe to either remove conditions or let the house go.
The most common reason for using an escape clause is when the buyer has a condition of sale of buyer's property within the offer. The longer the timeframe for arranging financing, the more inclined a seller might be to add an escape clause to the contract.
Should You Consider Making a Backup Offer on a Conditionally Sold Home?
If the deal with the original buyer falls through, that deal is null and void, leaving the seller free to decide whether to put their home back on the market.
While the best idea is to get advice from your real estate agent, as a general rule, if you put in a backup offer on a property and the deal falls through or if there's an escape clause, your offer is next in line (just be sure to have your ducks in a row, like having the buyer’s deposit in hand).
Remember, in the real estate market, it's not over until it's over. Keep your eyes on the prize, and your offer ready. Who knows? You might just be the next owner of that ‘conditionally sold' home.
Final Words
And there you have it! Now you know the ins and outs of what ‘conditionally sold' means in the real estate world. Remember, every term and condition in the property market is an opportunity for the well-informed.
By understanding these concepts, you're not just a buyer; you're a smart investor making strategic decisions. Keep this knowledge in your toolkit as you navigate your home-buying journey.
Happy house hunting, and may you find the perfect home that ticks all your boxes!