During the red-hot pandemic-induced Canadian real estate market, it appeared that basic tenets of the home-buying process were tossed into the trash. At the height of the sizzling housing sector, where bidding wars heated up, conditions on a real estate offer when by the wayside. Many buyers were abandoning home inspections or home improvement requests for fear of losing out on the residential property. Some even went as far as forgoing a condition of receiving financing.
But conditions have normalized over the past year as the Bank of Canada (BoC) has tightened monetary policy by raising interest rates and trimming the balance sheet. In fact, according to a recent RE/MAX Housing Market Outlook Report for 2023, most housing markets have returned to balance.
This means that the concept of conditions has returned to the real estate marketplace. Conditions are simply agreed-upon components that must be fulfilled or performed before closing a transaction.
So, what are some of the more common conditions anyway? Let’s explore.
Conditions on a Real Estate Offer
Here are four common conditions when closing a real estate sale:
Sale of Existing Property
For buyers who are in the process of selling their existing property, this is one of the most common conditions on a real estate offer. It is usually utilized when buyers must sell their current homes before purchasing a new home. With this condition in place, you could back out of the transaction if the present property fails to sell in the pre-determined timeline.
Experts assert that this can be a helpful feature in a housing transaction during a slow market where it could take longer than what is usually expected to sell the property. However, it can be a deal-breaker in a frothy market like the one we recently experienced.
Condition of Financing
A financing condition affords the buyer additional time to secure financing for the purchase of the residential property. Once again, if the homebuyer cannot obtain the necessary funding within a specific timeframe, the individual can exit the agreement without a financial penalty.
Home Inspection Condition
The home inspection has returned, which has been music to the ears of every home inspection professional. A home inspection condition allows the buyer to hire a professional home inspector. This person will examine the property and determine if any problems, defects, or issues could affect the home’s value. It allows the buyer to decide whether or not they want the house badly enough to deal with the problems, insist the seller address them, or back out of the deal entirely.
Home inspections fell by the wayside during the recent hot seller’s market. Because many listings received multiple offers, if a condition like a home inspection was included, it was easy for the seller to simply move on to another offer. Buyers felt they needed to drop the condition to have a chance of getting the home.
Peter Weeks, president of the Canadian Association of Home and Property Inspectors (CAHPI), recently told The Globe and Mail that it is welcome news that more households are pushing for inspections after seeing many horror stories throughout his career.
“It’s concerning. Getting an inspection is truly important, and in terms of consumer confidence, it’s the only thing people have,” he said.
Home Improvement Conditions
This ties into the home inspection point, but a home improvement request can be a terrific condition for buyers. Essentially, this condition enables the buyer to request the seller to make specific improvements to the property before the sale is finalized. During negotiations, the buyers and sellers may discuss the maximum amount to be spent on repairs, an agreement on what improvements are needed to close the sale, or a provision to exit the deal if the home is in a state of disrepair.
Find Your Support Team
In the end, gathering a team that includes an experienced real estate agent, legal representative and financial expert is a crucial strategy to help you during the buying and selling process. This will ensure that you make the right decisions when during one of the most important transactions of your lifetime. Conditions are vital to real estate investments as you can shield your bank account.