What is a Conditional Offer?
What is a conditional offer?
The majority of condo purchases will be conditional for the first few days, and have a chance of not firming up, that is to say, they do not end up closing. The conditions are usually put forward by the purchaser’s representative to protect the buyer while more information is obtained on the unit.
A condo unit is usually sold conditional upon the review of a Status certificate by the purchaser’s lawyer.
The analysis of the Status Certificate includes a review of the declaration, rules and regulations, by laws, outstanding maintenance fees and a study of the Reserve Fund of the condo building.
Every condo building has a Reserve Fund. This Reserve Fund is where a portion of maintenance fees are paid into each month. The Reserve Fund is used to pay employees, utilities, garbage collection and for various other maintenance around the condo. This fund is kept for any unforeseen expenses such as the roof requiring repair or other upgrades and damages that need replacing or fixing.
Offers on condos are conditional for various amounts of time, but generally will range from 2-10 business days. If the buyers lawyer reviews the information and everything is well managed and there are no concerns, the conditions are then fulfilled, and the purchaser can firm up the deal. Although, if the lawyer discovers that there is a special assessment, which can occur when there is not enough money in the Reserve Fund resulting in the condo owner paying out of pocket for upcoming renovations, or other concerns are found, then the buyer can choose to walk away without consequence, or bring the offer back to the negotiating table.
The status certificate will often appear as a condition in an offer to purchase a condo unit, although there are other conditions that may be applicable.
If you are obtaining a mortgage, you would be best advised to put a financing condition into the offer, even if you have received a mortgage pre-approval. This allows the lender to approve the property, as it will also need to qualify for the mortgage, not just you.
Although less used, you may choose to put an inspection condition into the offer. As most condos will have the outside of the building covered by their maintenance fees (so you may not need to replace windows or doors at your own expense), many purchasers do not include this in the offer. It is always advised to have an inspection done for your own piece of mind and ensure that nothing costly is in need of fixing or repair.
There are so many other conditions that can be added to an agreement due to the various types of homes and purchasing circumstances. These three conditions are what we most often see in an offer to purchase. Speak with your real estate agent to find out what conditions would be best recommended for you and the unit you are looking at purchasing.