Conditional Offer on a House: How Conditional and Firm Offers Work

A conditional offer gives a homebuyer or seller time to confirm important details before becoming unconditionally obligated to complete a real estate purchase. Common conditions involve mortgage financing, a home inspection, the sale of the buyer’s existing property, insurance, or the review of condominium documents.

An accepted conditional offer is still a binding agreement. The difference is that the agreement contains one or more conditions that must be satisfied or waived by specified deadlines. If every condition is properly satisfied or waived, the agreement becomes firm and the parties proceed toward closing.

A conditional offer is an offer to purchase a property that includes one or more conditions. For example, a buyer may offer to purchase a home for $700,000 on the condition that the buyer obtains satisfactory mortgage financing within five business days.

Before acceptance, it is an offer that the seller may accept, reject, or counter. Once the seller accepts it, the offer generally becomes a binding agreement of purchase and sale subject to the included conditions.

Conditions can benefit the buyer, the seller, or both parties. The agreement should identify:

• What must occur for the condition to be satisfied
• Which party benefits from the condition
• The deadline for satisfying or waiving it
• Whether written notice is required
• What happens if the condition is not satisfied or waived

The exact wording matters. Some conditions give a party broad discretion to determine whether a result is satisfactory. Others use objective requirements, such as obtaining financing for a minimum amount or confirming that the cost of necessary repairs does not exceed a stated limit.

Although “contingency” is commonly used in the United States, Canadian real estate agreements more often use the terms “condition” or “subject clause.”

A firm offer can still contain contractual terms, representations, warranties and closing obligations. “Firm” does not mean that the transaction has closed or that nothing can go wrong. It means there are no remaining contractual conditions that must be satisfied or waived before the parties are unconditionally obligated to complete the sale.

Limited statutory cancellation or rescission rights may also exist in some provinces or for certain types of property. These rights are separate from conditions negotiated in an agreement of purchase and sale.

For example, buyers of many residential properties have three business days after acceptance to rescind the contract in British Columbia. This statutory right generally cannot be waived, and a buyer who exercises it must pay the seller 0.25% of the purchase price. Exemptions apply. Other provinces may provide cancellation rights for particular transactions, such as certain purchases from condominium developers.

The party benefiting from a condition normally has until the stated deadline to complete the required investigation or obtain the necessary approval.

A condition is satisfied or fulfilled when its requirements have been met. A condition is waived when the party entitled to its benefit gives up that protection, provided the condition is capable of waiver and the agreement permits that party to waive it. A condition benefiting both parties generally cannot be waived by only one of them.

Depending on the agreement, written notice of fulfilment or waiver may need to be delivered before the deadline. It is not always enough for the underlying event to occur. For example, receiving mortgage approval may not automatically remove a financing condition if the agreement also requires the buyer to deliver written notice.

A condition does not provide an unrestricted opportunity to change one’s mind. The benefiting party must comply with the agreement and may be required to act honestly and make reasonable efforts to satisfy the condition.

Once every condition has been satisfied or waived, the agreement becomes firm. The buyer and seller must then complete their remaining obligations and close the transaction on the agreed date.

A financing condition gives the buyer time to obtain a satisfactory mortgage commitment for the specific property.

Mortgage pre-approval does not guarantee final approval. The lender may still need to verify the property’s value and condition, review the purchase agreement, confirm the buyer’s income and debts, or obtain approval from a mortgage insurer. Changes to the buyer’s employment, credit, income or debt can also affect final approval.

The Financial Consumer Agency of Canada confirms that mortgage pre-approval does not guarantee that the borrower will ultimately receive a mortgage.

Before waiving a financing condition, the buyer should confirm that the lender has reviewed the specific property and should understand every outstanding requirement attached to the mortgage commitment. Even then, the buyer remains responsible for closing if the lender later withdraws or changes its approval.

An inspection condition allows the buyer to have the property inspected and evaluate the results before proceeding unconditionally.

The home inspection may cover accessible structural components, roofing, plumbing, electrical systems, heating and cooling equipment, moisture concerns and other visible conditions. Its precise scope depends on the property and the inspector’s services. Specialized inspections may be appropriate for wells, septic systems, foundations, environmental concerns, mold or wood-burning appliances.

If an inspection identifies a problem, the buyer’s options depend on the wording of the condition. The buyer may be able to:

• Satisfy or waive the condition and proceed
• Ask the seller to make repairs
• Request a price reduction or another amendment
• Allow the agreement to terminate or deliver notice of termination, where permitted

An inspection condition does not ordinarily allow the buyer to force the seller to complete repairs. Any repair, credit or price adjustment must be accepted by both parties and documented in writing.

This condition makes the purchase dependent on the buyer selling an existing property by a specified date.

It protects a buyer who cannot or does not want to own and finance two homes at the same time. However, it creates uncertainty for the seller because the transaction depends on the sale of another property.

The agreement may include an escape or time clause allowing the seller to continue marketing the home. If the seller receives another acceptable offer, the original buyer may be given a limited period to remove the sale condition and proceed firmly. The details depend entirely on the clause.

Bridge financing is not always a substitute for this condition. Many bridge-loan programs require the buyer’s existing home to have a firm sale agreement. Buyers considering a HELOC, bridge loan or another method of purchasing before selling should first confirm their eligibility and ability to carry both properties.

An appraisal condition may allow the buyer to terminate or reconsider the purchase if the property’s appraised value is lower than the agreed purchase price.

The maximum mortgage amount is generally calculated using the lender’s accepted lending value, which is commonly the lower of the purchase price and the accepted appraised value. If the lender’s valuation is too low, the buyer may need to increase the down payment, obtain different financing, renegotiate the purchase price or rely on an applicable condition to terminate the agreement.

A comparative market analysis prepared by a real estate professional is not a guarantee of the value a lender or appraiser will accept. Depending on its wording, a financing condition may already address appraisal-related financing problems, so a separate appraisal condition is not used in every transaction.

Mortgage lenders generally require adequate property insurance before advancing funds. An insurance condition gives the buyer time to confirm that the property can be insured at an acceptable cost and on acceptable terms.

This can be particularly important for properties with older wiring, oil tanks, wood-burning appliances, previous water damage, flood exposure, vacant buildings or other characteristics that may limit coverage.

The important question is not whether insurance can be purchased quickly or online. It is whether an insurer will provide the coverage required by the buyer and lender on acceptable terms.

When purchasing a condominium or strata property, a buyer may make the offer conditional on reviewing the corporation’s documents. Depending on the province and property, these may include financial statements, budgets, bylaws, meeting minutes, insurance information, reserve-fund studies, status certificates or disclosure statements.

This review can reveal planned special assessments, legal disputes, building deficiencies, insurance issues, restrictions and other financial obligations.

An offer may be conditional on approval by either party’s lawyer or notary. For buyers, this is common in private sales, rural purchases, or non-standard agreements. For sellers, it is particularly valuable when assessing vendor take-back financing, non-standard buyer clauses, estate or probate matters, or transactions conducted without real estate agent representation.

The condition should clearly state the scope of the review, who benefits from it, and the deadline for approval.

There is no standard conditional period across Canada. Deadlines can range from 3 to 5 business days in competitive markets to several weeks or months when dealing with specialized inspections, seller probate, complex financing, or sale-of-property clauses.

The length of the timeline involves competing priorities for each party:

• The Benefiting Party: Requires sufficient time to conduct thorough due diligence, obtain third-party approvals, or fulfill personal obligations without unnecessary risk.
• The Non-Benefiting Party: Prefers a shorter timeframe to limit how long the property is tied up off the active market or how long funds remain committed.

If additional time is required, the parties may negotiate a written extension before the deadline. Neither party is obligated to grant an extension.

The result depends on the language of the agreement.

In many agreements, if a condition is not satisfied or waived by the deadline, the agreement becomes null and void. In others, the benefiting party must provide notice or take another specified step. A poorly drafted condition can create uncertainty about whether the agreement ended and whether the parties met their obligations.

A buyer should not assume that missing a deadline automatically provides a risk-free exit. Buyers and sellers should obtain legal advice promptly if there is disagreement about whether a condition was properly satisfied, waived or relied upon.

When an agreement becomes null and void under a condition, the contract will commonly provide that the buyer’s deposit is to be returned. However, the result depends on the agreement, and the deposit holder may be unable to release the money without signed directions from both parties or a court order.

Deposits are commonly held in a brokerage or lawyer’s trust account rather than by the seller. Depending on provincial rules and the circumstances, the deposit holder may require written authorization from both parties before releasing the money. If the parties disagree, the deposit may remain in trust until the dispute is resolved or a court determines who is entitled to it.

For example, BCFSA’s deposit guidelines state that a brokerage generally requires an agreement signed by all parties before releasing a deposit after a transaction fails to complete.

A deposit should therefore not be described as automatically or immediately refundable in every case.

Market conditions influence how sellers compare offers. When several buyers are competing for the same property, a seller may prefer an offer with fewer conditions, a larger deposit, a convenient closing date or a higher price.

That does not prevent a buyer from including conditions. It means the seller may choose another offer that provides more certainty.

In a slower market, buyers may have more room to negotiate financing, inspection, sale-of-property and other protections. Regardless of the market, removing an important condition can expose the buyer to losses far greater than the value of winning the property.

Removing financing, inspection or document-review conditions shifts those risks to the buyer and can leave the buyer obligated to close even when serious problems arise. A buyer who fails to close may lose the deposit and face a claim for additional damages, including losses the seller suffers when reselling the property.

A firm offer may improve a buyer’s position in a multiple-offer situation, but it should not be treated as a routine bidding strategy.

Before making an offer without conditions, a buyer should consider whether:

• The lender has reviewed the specific property, not just the buyer’s finances
• The buyer can cover an appraisal shortfall
• An inspection has already been completed or the buyer accepts the property-related risks
• The property can be insured
• Condominium, strata or other relevant documents have been reviewed
• The buyer can complete the purchase if the existing home does not sell as expected
• A lawyer or notary has reviewed any unusual contractual issues

A mortgage pre-approval alone does not eliminate the need for a financing condition. Final financing can still fail because of the property, a low valuation, changes in the buyer’s financial circumstances or lender requirements.

A conditional offer allows a buyer or seller to address specific risks before becoming unconditionally obligated to complete a property purchase. Once accepted, however, it is already a binding agreement subject to those conditions.

Every condition should clearly identify what must happen, who benefits from it, when it expires and what notice is required. If all conditions are satisfied or waived, the agreement becomes firm and proceeds toward closing. If a condition is not met, the outcome and treatment of the deposit depend on the agreement and applicable provincial law.

Conditions should be drafted and reviewed carefully. Buyers and sellers should consult their real estate professional and obtain advice from a lawyer or notary when the wording or legal consequences are uncertain.

A buyer may terminate or allow the agreement to end when a condition included for the buyer's benefit is not satisfied, provided the buyer follows the condition and the agreement. A conditional agreement does not give the buyer the right to cancel for an unrelated reason.

Not necessarily. The buyer must rely on a right provided by the agreement or applicable law. Simply changing one's mind is generally not enough to cancel an accepted agreement without consequences.

Once accepted by the seller, a conditional offer generally becomes a binding agreement of purchase and sale. The parties' obligations remain subject to the included conditions.

The property is conditionally sold, but the agreement is not yet firm. It becomes firm when all conditions are satisfied or waived. The transaction is completed later on the closing date.

No. The contract commonly provides for the deposit to be returned when the agreement validly ends under a condition, but the deposit holder may require authorization from both parties before releasing it. A dispute can delay repayment.

A seller may be able to accept a backup offer that is expressly conditional on the first agreement ending. The seller cannot ordinarily disregard an existing binding agreement. A sale-of-property condition may also contain an escape clause allowing the seller to continue marketing the home and require the original buyer to respond within a stated period.

Yes. An extension normally requires the agreement of both parties. If the seller refuses and the buyer cannot satisfy or waive the condition by the original deadline, the consequences are determined by the existing agreement.

No. Pre-approval is not a guarantee of final mortgage financing. The lender must still approve the property and may reconsider the application if the buyer's finances change.

Not usually. The buyer may request repairs, a credit or a lower price, but the seller can refuse. The seller is required to complete repairs only if that obligation is included in the agreement or accepted through a written amendment.

Fulfilling a condition means its requirements have been met. Waiving it means a party entitled to the condition's benefit voluntarily gives up that protection, where the condition and agreement permit waiver. Either action may require written notice before the deadline.

This article provides general information and is not legal advice. Real estate contracts, terminology, deposit procedures and statutory cancellation rights vary by province and transaction. Consult a lawyer or notary about a specific agreement.