Conditional Offers in Ontario Real Estate: Financing and Inspection

In Ontario real estate, a conditional offer is a purchase agreement that becomes binding only if one or more specified conditions are met — or waived — within an agreed timeframe. Most residential purchases include at least one condition, and understanding how conditions work can mean the difference between a smooth transaction and an unexpected legal dispute.

Whether you are a first-time buyer seeking financing approval or a seller evaluating competing offers, this guide explains the mechanics of the conditional offer in real estate Ontario transactions, the two most common conditions, and how the process flows from accepted offer to firm deal.

Firm Offers vs. Conditional Offers

A firm offer has no conditions attached. Once both parties sign, the deal is binding immediately. In competitive markets, buyers sometimes remove conditions to make their offers more attractive — a strategy that carries real risk.

A conditional offer includes one or more clauses that give a party the right to cancel (or require the other party to perform an obligation) before the deal becomes firm. The offer is accepted and legally binding in the sense that neither party can simply walk away, but the deal is not fully locked until the conditions are dealt with.

The Two Most Common Conditions

1. Financing Condition

A financing condition (sometimes called a "mortgage condition") gives the buyer a set number of days — typically five to ten business days, though the parties negotiate this — to arrange satisfactory mortgage financing for the property.

If the buyer cannot obtain financing on acceptable terms, they can give notice that the condition has not been fulfilled and the deal collapses. The deposit is returned.

A few important nuances:

• The condition protects the buyer, but it can be waived by the buyer. If the buyer waives the financing condition before the deadline, the deal becomes firm regardless of whether financing was actually secured. Waiving without confirmed financing is risky.
• A pre-approval is not the same as a firm mortgage commitment. Lenders approve borrowers at the pre-approval stage, but final approval depends on the specific property (appraisal, title search, etc.). Always use the condition period to get confirmation for the actual property you are buying.
• Sellers generally prefer shorter condition periods. Buyers should ask for enough time to actually complete the process.

2. Home Inspection Condition

A home inspection condition gives the buyer the right to hire a licensed home inspector to inspect the property. If the inspection reveals issues the buyer finds unsatisfactory, the buyer can cancel.

The condition language matters significantly. Some inspection conditions are drafted broadly ("satisfactory to the buyer in the buyer's sole discretion"), giving the buyer wide latitude to cancel. Others are narrower, requiring the buyer to obtain an inspector's report and identify specific deficiencies above a dollar threshold.

In competitive markets, some buyers waive the inspection condition or conduct a pre-offer inspection (inspecting before submitting the offer). Pre-offer inspections are faster but put pressure on buyers to decide quickly.

Other conditions you might encounter include:

• Status certificate review (for condo purchases)
• Sale of buyer's existing property
• Satisfactory review of a septic system or well
• Lawyer review (less common in Ontario than in some other provinces but can be negotiated)

How Conditions Are Dealt With: Waiver vs. Fulfillment

Once an offer is accepted and a condition period is running, the condition must be resolved in one of two ways before the deal can become firm.

Fulfillment

Fulfillment means the condition has been met. For example, the buyer receives a firm mortgage commitment and signs a fulfillment notice confirming that the financing condition is fulfilled. The deal then becomes firm.

Waiver

Waiver means the party who benefits from the condition chooses to give up the right — even if the condition was not technically met. A buyer might waive a financing condition if they have not yet received a formal commitment letter but feel confident enough to proceed anyway.

Key rule: Only the party who benefits from a condition can waive it, unless the contract says otherwise. A seller cannot waive a buyer's financing condition.

Both fulfillment and waiver must typically be communicated in writing, signed by the appropriate party, and delivered to the other side before the condition deadline expires.

What Happens If the Condition Deadline Passes?

If neither waiver nor fulfillment notice is delivered before the condition deadline, the agreement is generally considered at an end and the deposit is returned. However, the exact outcome depends on the wording of the Agreement of Purchase and Sale. Some agreements include automatic extension provisions; others do not.

Do not assume the deal is automatically dead or automatically extended. If the deadline is approaching and the condition has not been resolved, contact your real estate lawyer right away.

Timelines: How Long Are Condition Periods?

Condition periods are negotiated between the parties — there is no legislated minimum or maximum for most residential conditions. Common ranges:

• Financing: 5–10 business days
• Home inspection: 3–7 business days
• Status certificate review: 3–5 business days (and the condo corporation has its own timeline to provide the certificate)

In heated markets, sellers push for shorter periods. Buyers should resist agreeing to timelines so short that they cannot realistically complete the required work.

Note that "business days" and "calendar days" are not the same. Read the agreement carefully to determine which applies to each condition.

What the Condition Means for the Seller

A seller who accepts a conditional offer cannot simply sell to someone else while the condition period runs — with one exception. Some agreements include an escape clause (sometimes called a "48-hour clause"), which allows the seller to continue marketing the property and, if they receive a better offer, give the original buyer a set time (often 24–48 hours) to waive their condition or lose the deal. This clause must be explicitly negotiated into the agreement.

Frequently asked questions