A home is one of the biggest purchases you’ll ever make. So it’s only natural that you’d want to safeguard yourself against unnecessary risk. Fortunately, adding the right conditions to your offer can help you avoid financial consequences if you back out of your purchase under certain circumstances. On the flip side, including them can make your bid less appealing to sellers (which isn’t what you want in a competitive situation).

If you’re wondering whether home-buying conditions can benefit you, here are the pros and cons of adding them to your offer…

The Basics

Home-buying conditions are stipulations that must be met in order for a real estate purchase to be finalized. They’re put forth by the buyer, who may add them to their offer as a form of protection against worst-case scenarios. Here are a few of the most common home-buying conditions:

Financing conditions

A financing condition makes the purchase of a home contingent upon the buyer’s ability to obtain the financing they need. Adding one to your agreement will allow you to get out of a real estate deal (without penalty) if you don’t receive the mortgage you were counting on.

Inspection conditions

An inspection condition tells the seller that you intend to have a professional inspector look closely at their home before completing your purchase. If you aren’t satisfied with the results you receive, you’re not obligated to go through with the deal.

Title conditions

This type of condition makes a real estate purchase contingent on the property having “clean title.” In other words, the seller must own it free and clear—and if any information that proves otherwise turns up, they can back out of the purchase. Examples include if ownership is in question (say, due to a conflict between former spouses) or there are claims against the property (such as unpaid taxes).

The pros & cons

From the buyer’s point of view, the benefit of using conditions is clear. If the worst happens, you’re not obligated to go through with a purchase that could lead to financial hardship or other serious consequences.

Of course, there’s also a downside to including home-buying conditions. Namely: it could make your offer less attractive to sellers. From their point of view, having to meet a buyer’s expectations can complicate and prolong a home sale—and even prevent it from happening. For this reason, most sellers prefer “clean” offers (those that are free of conditions). That’s worth considering in Toronto’s hot housing market, where sellers often have several buyers vying for their property.

How to protect yourself

While home-buying conditions exist to protect you (the buyer), you may choose to forgo them to increase your chances of having your offer accepted. If you go this route, it’s wise to do as much due diligence as you can ahead of time. For example, you can request a pre-inspection prior to making an offer. If the seller agrees, it can provide you with peace of mind while eliminating the need for a potentially unattractive condition.

When you forgo your home-buying conditions, it’s especially important to have a lawyer review all documentation related to your purchase. Having a trustworthy and experienced real estate agent by your side is equally crucial! A professional with a solid track record (both with multiple-offer scenarios and in general) can help take as much risk out of an unconditional offer as possible.

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