- A home inspection is not a pass or fail test, so a buyer who finds a problem may ask for repairs, accept it, ask for a lower price, or walk away.
- A condition that gives a buyer sole and absolute discretion is still read together with any duty in the agreement to act in good faith and with due diligence.
- If a buyer fails to close, the seller's damages are measured by the difference between the agreed price and the later resale price, with the deposit deducted if there is a loss.
A conditional offer is one where the buyer's commitment depends on something happening first, often financing or a satisfactory home inspection. For a seller, it means a deal that is not yet firm.
This article explains how conditions generally work, what a seller should look at before accepting, and what the rules say if a deal collapses. How a conditional offer applies to you depends on the exact wording of the agreement, so it is worth having a lawyer read it before you sign.
What a condition does
A condition is a term that makes the buyer's commitment depend on something happening first, and the wording of the agreement sets out the details. Until then, the sale may not become firm. Common examples are financing, home inspection, and for condos, review of status documents.
On inspections, Ontario's guidance says an inspection is not a pass or fail test. After one, a buyer may ask the seller for repairs, accept the defect, ask for a lower price, or decide not to buy. Expect a request for negotiation, not just a yes or no.
Read the wording of each condition
Wording matters. A condition that says it is for the buyer's sole and absolute discretion is not unlimited: it is still read together with any duty in the agreement to act in good faith and with due diligence. In one Court of Appeal for Ontario case, the buyer had to apply to the existing mortgagees in good faith before deciding in its sole discretion whether their terms were acceptable.
Before you accept, check these points:
- What exactly must happen, and who it protects.
- The date and time by which the condition must be satisfied or waived.
- How the buyer must give notice that the condition is waived or not satisfied.
- Whether the agreement requires the buyer to act in good faith and with due diligence.
- What happens to the deposit if the condition is not met.
If you have prepared a seller property information statement, remember it is optional, but your agent must tell every interested buyer that it exists and give a copy to any buyer who asks.
Waiver dates and marketing the home meanwhile
Whether you can keep showing the home or accept backup offers while a condition is open depends on the exact wording of your agreement and any related terms. It is not something to assume. Ask your lawyer to review the conditions and dates before you sign, including what notice a buyer must give.
Condos have their own wrinkle. New or pre-construction condo buyers have a 10-day right to cancel, but for resale condos no law sets a period for cancelling without penalty. For a resale condo, how a buyer is protected depends on the wording of the agreement, so it is worth confirming with a lawyer.
If the deal falls apart
Deposits are normally held by the brokerage. If buyer and seller disagree about the deposit, the brokerage can pay it out only under a mutual consent or release signed by both sides, or under a court order. After two years with no determination, a disputed deposit is transferred to RECO, which holds it in trust.
| Situation | What the rules say |
|---|---|
| Buyer fails to close | Seller's damages are the difference between the agreed price and the later resale price. |
| Seller has a resale loss | The forfeited deposit is part payment of damages and is deducted from the award. |
| Seller's duty to reduce losses | Avoidable losses cannot be recovered, but the seller need not accept a lower offer from the defaulting buyer. |
| Timing of the duty | In one case, sellers had no duty to mitigate until the buyers breached, and could re-list after the failed closing. |
Outcomes turn on the facts of each case, so get advice if a buyer will not close.
What to do next
- Have a lawyer review the offer and every condition before you accept.
- Write down all waiver dates and times in one place.
- Ask your agent how financing and inspection conditions are worded.
- Decide in advance how you would respond to a repair or price request.
- Confirm where the deposit is held and how it is released.
- Keep records of everything the buyer's side sends you.
Frequently asked questions
Can a buyer walk away because the inspection found something?
If the agreement has an inspection condition, a buyer may ask for repairs, accept the defect, ask for a lower price, or decide not to buy. The wording of the condition decides how and when this must be done.
Does sole and absolute discretion mean the buyer can refuse for any reason?
Not necessarily. Such a condition is still read together with any duty in the agreement to act in good faith and with due diligence.
Do I keep the deposit if the buyer fails to close?
It depends. If the seller has a loss on resale, the deposit counts as part payment of damages and is deducted from them. If the deposit is disputed, the brokerage can release it only with both sides' signed consent or a court order.
Do I have to accept a lower offer from the buyer who defaulted?
No. A seller is not required to accept a lower offer from the buyer who defaulted.
Sources
- RECO – Property information statements — reco.on.ca
- RECO – Consumer deposit insurance FAQ — reco.on.ca
- Court of Appeal for Ontario – Azzarello v. Shawqi, 2019 ONCA 820 — ontariocourts.ca
- Court of Appeal for Ontario – Lucijanic v. Hashmi, 2019 ONCA 97 — ontariocourts.ca
- Court of Appeal for Ontario – International Property Group Inc. v. 2262814 Ontario Ltd., 2016 ONCA 203 — ontariocourts.ca
- Ontario.ca – What to know before buying a home — ontario.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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