- In an Ontario Agreement of Purchase and Sale (APS), a condition is a clause that makes the contract binding only if a specified event occurs (or does not occur) within a specified period.
- Financing Condition The most common condition gives the buyer a set number of business days (often five to ten, though this varies) to secure mortgage approval.
- When a seller accepts an offer that includes a sale of existing property condition, the APS often contains an escape clause (sometimes called a kick-out clause or right of first refusal).
A firm offer is straightforward: the buyer commits unconditionally, and once accepted, you have a deal. A conditional offer is more complicated — and for sellers, more nerve-wracking. You have accepted an offer, taken your home off the market (at least temporarily), and you are waiting to find out whether the transaction will actually proceed.
Understanding how conditions work from the seller's perspective in Ontario — what they mean legally, how long they last, and what your options are if things go sideways — will help you make better decisions at every stage of the negotiation.
What Conditions Mean for a Seller
In an Ontario Agreement of Purchase and Sale (APS), a condition is a clause that makes the contract binding only if a specified event occurs (or does not occur) within a specified period. Until the condition is satisfied or waived, neither party is locked in.
From the seller's point of view, the critical implication is this: a conditional offer is not a firm sale. You cannot relist the property, accept another offer unconditionally, or start firm plans to purchase your next home — not without careful attention to what the agreement actually permits you to do.
Common Buyer Conditions and Their Practical Impact
Financing Condition
The most common condition gives the buyer a set number of business days (often five to ten, though this varies) to secure mortgage approval. If the buyer cannot get financing, they can walk away and recover their deposit.
For sellers, a financing condition carries real risk. The buyer may have been pre-approved, but pre-approval is not the same as a firm mortgage commitment — and lenders can change their minds when the property is appraised lower than the purchase price or the buyer's financial situation shifts during the condition period.
Home Inspection Condition
A home inspection condition allows the buyer to have a licensed inspector examine the property. If the buyer is not satisfied with the results, they can typically walk — though most conditions are drafted as "satisfactory to the buyer in the buyer's sole discretion," meaning the buyer has wide latitude to exit on this basis even over minor concerns.
Sellers sometimes agree to have an inspection done pre-listing (a "pre-listing inspection") to reduce buyer anxiety and the likelihood that an inspection condition will be used as an exit.
Sale of Existing Property Condition
A buyer who must sell their current home before they can close on yours may request a sale of existing property condition. This is the most seller-unfriendly condition of the three. You are now dependent not only on your buyer's ability to perform, but on the ability of the buyer's buyer to perform. Chains of dependent transactions increase closing risk significantly.
This condition is often accompanied by an escape clause, which is discussed below.
The Escape Clause (Kick-Out Clause)
When a seller accepts an offer that includes a sale of existing property condition, the APS often contains an escape clause (sometimes called a kick-out clause or right of first refusal). The escape clause lets the seller continue marketing the property and, if a better offer comes along, give the original buyer a short window — typically 24 to 72 hours, though the parties can negotiate any period — to either:
- Waive the sale of existing property condition and proceed firm, or
- Walk away and receive their deposit back
How the Escape Clause Works in Practice
- Seller accepts the conditional offer and continues to market.
- Seller receives a second, better offer (typically firm, or conditional on something less risky).
- Seller delivers formal written notice to the first buyer under the escape clause.
- The first buyer has the notice period to decide.
- If the first buyer waives, the deal proceeds firm and the second offer is declined.
- If the first buyer walks or fails to respond in time, the seller moves to the second offer.
The notice period is strictly enforced. If you as the seller fail to deliver notice correctly — in writing, within the contractual timelines, to the right party or their agent — you may not be able to invoke the escape clause validly. Work with your lawyer and agent to make sure the process is done right.
Accepting Multiple Conditions: Risk Assessment
Not all conditions carry the same risk, and a seller's decision to accept a conditional offer should involve weighing:
- How many conditions are in the offer. One financing condition is manageable. Financing plus inspection plus sale of existing home is a much higher-risk package.
- The condition period. Shorter is generally better for sellers. A 10-business-day condition period is better than 30 days.
- The buyer's apparent financial position. Has the buyer been pre-approved? Do they have substantial equity in their existing home?
- The market. In a seller's market with multiple competing buyers, a seller has more leverage to push back on conditions or demand shorter timelines. In a buyer's market, refusing conditions may mean sitting on an unsold property for months.
Firm vs Conditional Offers: When Each Makes Sense
Some sellers — particularly in competitive markets — set a deadline and request that all offers be submitted on a single night ("offer night"). This environment sometimes produces firm offers, because buyers competing against each other cannot afford the delay of a condition period.
In slower markets, firm offers from buyers are rarer. Insisting on a firm offer may simply mean fewer or weaker offers. Sellers need to weigh the certainty of a firm offer against the strength of the offer price and terms.
A conditional offer at full asking price with a short condition period is often preferable to a firm offer at a lower price — but every situation is different.
What Happens When a Buyer Doesn't Waive on Time?
The condition period has an expiry date and time written into the APS. If the buyer fails to waive (or satisfy) the condition before that deadline, the agreement is automatically terminated in most standard Ontario agreements. The deposit must be returned to the buyer.
A buyer cannot unilaterally extend a condition period — the seller must agree to an extension in writing. Sellers are not required to grant extensions. If you have another buyer waiting or the market has moved in your favour, you may choose to let the condition expire and relist.
If a buyer asks for an extension, consider why: is it a genuine administrative delay (financing approval is taking a few extra days) or is it a signal that financing may not come through?
Seller Remedies When a Buyer Walks After Waiving
Once a buyer waives all conditions, the APS becomes a firm and binding contract. A buyer who subsequently refuses to close — for any reason — is in breach of contract.
As a seller, your remedies for a buyer's breach include:
- Forfeiture of the deposit: The deposit is typically released to the seller as partial damages. The seller does not need to sue to keep the deposit in most circumstances, but the legal process for releasing it requires either buyer consent or a court order if the buyer disputes.
- Damages: If your actual loss exceeds the deposit — for example, if you end up selling for less to the next buyer — you can sue for the shortfall. This involves litigation, which takes time and money.
- Specific performance: In some cases, a seller can seek a court order requiring the buyer to complete the purchase. This remedy is less common in residential real estate.
Speak with your lawyer immediately if a buyer defaults after waiving conditions.
Best Practices for Negotiating Conditions
- Push back on condition periods: Request the shortest period the buyer will accept. Many buyers ask for 10 business days when 5 would do.
- Insist on an escape clause whenever a sale of existing property condition is involved.
- Read every condition carefully: The language matters. "Satisfactory in the buyer's sole and absolute discretion" gives the buyer more room to exit than a condition that requires a specific, objective outcome.
- Coordinate with your lawyer before signing: Your real estate agent negotiates on your behalf, but your lawyer reviews and advises on the legal implications of what is in the APS. Engage your lawyer early.
- Don't make irreversible commitments on your next purchase until conditions are waived on this sale.
Frequently asked questions
Can I accept a second offer while the first one is still conditional?
Yes — you can continue to show the property and negotiate with other buyers, as long as you are transparent about the existing conditional agreement. If your first agreement contains an escape clause, you can invoke it when the second offer materializes. If it does not contain an escape clause, your situation is more constrained. Get legal advice before proceeding.
What does "waiver" mean, and does it have to be in writing?
A waiver is the buyer's formal declaration that a condition has been satisfied (or that they are giving up their right to insist on it). In standard Ontario real estate practice, waivers are done in writing — a signed waiver form delivered to the seller's agent. An oral statement from a buyer that they are "good to go" is not legally sufficient. Do not treat a condition as waived until you have a signed document.
Can a seller back out of a conditional offer before the condition period expires?
Generally, no. Once a seller accepts a conditional offer (an APS is executed by both parties), the seller is bound to the agreement. The seller cannot simply accept a better offer and walk away from the conditional one. The escape clause — if it exists — is the tool for navigating competing offers, not unilateral withdrawal.
Is the deposit at risk if the buyer walks on a financing condition?
No. Standard Ontario financing conditions allow the buyer to terminate and recover the deposit if their financing falls through. The deposit is returned in full. The seller's remedy in that situation is simply to relist — there is no entitlement to damages for a buyer exercising a valid condition.
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