What Conditions Can a Buyer Put in an Offer on Your Ontario Home?

You have an offer on your home, and it is not firm. The buyer has added conditions, which are terms that must be satisfied before the deal becomes binding. Common ones deal with financing, a home inspection, or the sale of the buyer's own home.

Each condition gives the buyer a possible exit and gives you a period of uncertainty. This article explains how these conditions generally work, where sellers run into trouble, and what to review before you sign. It is general information, not advice on your specific offer.

What a condition does for you and for the buyer

A condition says that the sale depends on something happening by a set date. If it happens or is given up by the buyer, the deal can firm up, and how that must be done depends on the wording of the agreement. If it does not happen, the agreement may end. The exact result depends on the words in the agreement of purchase and sale.

As a seller, you are mainly looking at three things: what has to happen, who gets to decide, and by when. A vague condition or an open-ended date can leave your home off the market longer than you expect.

The inspection condition

Ontario's guidance describes a home inspection as 'not a pass or fail test'. After an inspection, a buyer may ask the seller for repairs, accept the defect, ask for a lower price, or decide not to buy. Buyers are also advised to get their own inspection even if the seller has one.

That means an inspection condition often leads to a negotiation rather than a clean yes or no. You can agree to repairs, offer a price adjustment, or decline and let the buyer decide whether to continue.

• Check how many days the buyer has and when the condition must be waived or fulfilled.
• Check whether the condition says the buyer must act on specific defects or may simply be dissatisfied.
• Decide in advance how far you are willing to go on repairs or price.

Financing and sale-of-home conditions

A financing condition makes the deal depend on the buyer getting a mortgage on acceptable terms. A sale-of-home condition makes it depend on the buyer selling their current property. Both put part of the outcome in someone else's hands, such as a lender or another purchaser.

Some conditions say the buyer may decide in their 'sole and absolute discretion'. That does not always mean the buyer can walk away for any reason. Such a condition is still read together with any duty in the agreement to act in good faith and with due diligence. In International Property Group, the buyer had to apply to the existing mortgagees in good faith before it could decide in its sole discretion whether their terms were acceptable.

In practice, a buyer who does not make a real effort to satisfy a condition may face questions later. Whether the buyer met that standard depends on the wording and the facts, which is a good reason to have a lawyer review the conditions before you accept.

Deposits and what happens if the deal falls through

Deposits are normally held by the brokerage. If buyer and seller disagree over a deposit, the brokerage can pay it out only under a mutual consent or release signed by both sides, or under a court order. If a brokerage has held a disputed deposit for two years with no determination, it is transferred to RECO, which holds it in trust.

If a buyer fails to close without a valid reason, the seller's damages are measured as the difference between the agreed price and the price on the later resale. Where the seller has a resale loss, the forfeited deposit is treated as part payment of the damages and is deducted from the award. A seller also cannot recover losses that could reasonably have been avoided, although the seller is not required to accept a lower offer from the buyer who defaulted.

In Lucijanic v. Hashmi, the sellers had no duty to mitigate until the buyers breached, and after the failed closing they could re-list the property. How a condition that is not met is treated, compared with a buyer who simply refuses to close, depends on the agreement and the facts, so it is worth confirming with a lawyer.

If the buyer is purchasing a new or pre-construction condo, there is a 10-day right to cancel; for resale condos, no law sets a period for cancelling without penalty.

What to do next

• Read every condition and note the deadline and who decides.
• Ask whether the condition must be waived or fulfilled in writing.
• Confirm how long your home stays off the market, and whether you can keep showing it.
• Ask what happens to the deposit if a condition fails.
• Have a real estate lawyer review the offer before you sign or counter.

Frequently asked questions