A conditional offer is an Agreement of Purchase and Sale that includes one or more conditions the buyer must satisfy before the transaction becomes legally binding. If the conditions are not fulfilled or waived within the agreed timeframe, the deal ends and the buyer can walk away.
In Ontario, most residential offers are prepared using standard forms published by the Ontario Real Estate Association. Any non-standard terms, including conditions, are added to the schedules of the agreement.
Schedule A in the purchase and sale agreement contains additional clauses that go beyond the standard form, and this is where conditions like financing approval, home inspection results, or seller repair obligations are written.
The most common conditions in Ontario transactions are financing, home inspection, and status certificate review. A financing condition protects buyers by giving them time to secure mortgage approval from a lender, and this condition typically allows anywhere from 3 to 10 business days depending on the agreement and market conditions.
A home inspection condition allows the buyer to hire a qualified inspector to evaluate the property's condition. For condo purchases, the agreement is often conditional on review of the status certificate. A less common but important condition is the sale of the buyer's existing property, which makes the purchase contingent on that prior sale closing successfully.
A conditional offer is different from a firm offer, which contains no conditions at all. A firm offer is an unconditional agreement to purchase a property, and once accepted by the seller, the buyer is legally bound to close on the deal. The choice between the two often depends on how competitive the market is and how much risk the buyer is prepared to accept.
The rule of thumb in Ontario is that no one can fault or successfully sue you for being unable to waive a condition, as long as you acted in good faith while trying to satisfy it. That means the buyer must genuinely attempt to meet the condition rather than use it as a way to simply change their mind. To firm up a conditional offer, you must waive each condition in writing, signed by all parties, often using OREA Form 123. Verbal waivers are not legally binding.
Understanding how conditional offers work is essential before you begin writing offers in Toronto or anywhere in Ontario. Conditions exist to protect buyers from serious financial risk, and knowing when to include them and when they can safely be waived is a conversation worth having with your agent and your lawyer early in the process.
