April 30th, 2018 – Yes, there is a standard clause in real estate we can add to a contract to specify that the purchase of your new home is conditional on the sale of your old home. There would be a few rules set up around this. It would have a time-limit when it expires and it would allow the seller to continue to market their home. Should another offer come in, you would have 24 or 48 hours to decide to remove your condition and proceed with the purchase or walk away.
Sounds great doesn’t it. Here is a chance to lock-up the home you want to buy, while still waiting to sell your current home.
Problem is this approach just doesn’t fly in Toronto’s ultra-competitive real estate market. This clause ties-up the seller and limits their ability to further market their home. Their home will appear as “sold conditionally” and become difficult to attract additional buyers. The seller would be tied to your ability to sell your old home and hoping that would hurry up and happen.
From the seller’s perspective, this is a needless impediment in getting their home sold. A seller might only accept this at the right price, or when they are experiencing greater difficulty in attracting any buyer interest at all. But given that Toronto real estate is generally almost always in a sellers market to strong sellers market, home sellers are not so desperate to agree to this condition. They are going to be better off continuing to market their home and to wait for a stronger buyer to come along.
If you are a home buyer in this position I empathize with you. Maybe you have been out looking at homes to buy and have found the perfect place, but you are not yet in a position to make an offer because your current home is still for sale. I am sorry. It is just not going to work. Perhaps you have seen this approach used on a TV show. That was likely in a different geography with different market forces at play, or like much of the TV shows, full of made-up story lines!
What Conditions Are Acceptable?
While an absolutely firm offer without any conditions at all is what the seller would most like to receive, that isn’t always what potential buyers are offering to them. Should there be a multiple offer bidding war situation, the offer without any conditions will appear to be the better option to the seller, because it offers them certainty.
If you are bringing the only offer to the table, there still is the possibility of some conditions being acceptable. The most common of these would be:
- Conditional on Lawyer’s Review – likely for 24-hours.
- Conditional on Home Inspection – possibly for 3 to 7-days.
- Conditional on Mortgage Financing Approval – typically for 7-days.
In each of these there is a task that the buyer is commiting to do. They need to carry out that task in the time frame specified. If everything is okay, at the end of the time frame the buyer will notify the seller the work is complete, the condition is fulfilled and the sale becomes firm.
Do you have some other unique set of circumstances not covered here, or need some more advice about properly structuring a real estate offer? Let Ralph know. He has many years of experience in the Toronto real estate market and can advise you on what the best approach might be.