Isn't it frustrating to call an agent about a house only to be told “Sorry that house is sold conditional” but it still appears on Realtor.ca? Ever wondered why some houses sold conditional are still available to see but others are not? I will try to explain it here.
When buyers make an offer on a home they generally have conditions in their offer. Some of the common conditions are Financing, Rare is the offer that is truly “Firm”. I have only seen a few. Home Inspection, Home Insurance, Lawyer Approval and Sale of Buyer's Property.
Here is the explanation of what each condition means and 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, 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 and the property itself. Some lenders can do this relatively quickly and some take longer. Banks usually take longer than the rich uncle. Generally times are not more than 10 days.
2. Conditional on Home Inspection. The buyer hires a home inspector at their own expense (approx. $400) 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.
5. Conditional on Sale of 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 is usually not more than 60 days.
The Escape Clause
There can be what is referred to as an Escape Clause in an offer. The escape clause is inserted when the length of time 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 pretty much off the market for the time period of the conditions. The escape clause means that the seller can look at other offers and the person with the original offer has a set timeframe to either remove conditions or let the house go. The most common instance of using an escape clause is when the buyer has a condition of sale of buyer's property within the offer, although it can be used in any instance with a condition. Sellers will usually accept a week or even up to two weeks for a buyer to arrange financing and an inspection but will balk waiting 2 months for a buyer to sell their home so escape clauses are generally only used for sale of buyer's property conditions.
Homes with offers with any conditions can still be shown to prospective buyers but without an escape clause in the existing offer what is the point? Most brokerages stop showings once a home is sold conditional on finance and inspection. Only once it is sold firm (conditions have all been waived) does the property come off of Realtor.ca.
Remember, an escape clause is the key factor on whether you will be seeing that home that is Sold Conditional.
James Myers is a Realtor with Royal LePage First Contact Realty and has been helping home sellers and buyers in Barrie, Innisfil, Springwater, Essa and Oro/Medonte in the Province of Ontario, Canada with their home ownership dreams since 1998. Office 705-728-4067
For more informative and helpful articles please visit my blog at http://www.jamesmyers.ca/blog