Navigating Conditional Offers: Unpacking the Pros & Cons for Sellers

Embarking on the journey of selling your home brings both excitement and pivotal decision-making moments. Consider this scenario: an enticing offer with an impressive price, a substantial deposit, and a pre-approved mortgage certificate. However, there's a condition— the buyers need to sell their current home before your deal becomes firm. Should you accept the offer? As we explore the pros and cons, it's crucial to dive into the intricacies, including the presence of escape clauses. In certain situations, an escape clause can add an extra layer of complexity and security to your decision-making process.

Pros of Accepting a Conditional Offer:
1) A Bird in the Hand:
Explanation: A conditional offer signals genuine interest from the buyer. It's an indication of their commitment to securing your property.
Advantage: Having a buyer genuinely interested in your home provides a sense of security during the selling process.

2) Room for Negotiation:
Explanation: Conditional offers provide an opportunity for negotiation. You might be able to find a compromise, such as accepting the condition if the buyer consents to a more favourable closing date, additional inclusions, or repairs or maintenance to be completed prior to closing.
Advantage: Negotiating terms can lead to a win-win situation, securing a deal that aligns better with your preferences.

3) Slower Market Consideration:
Explanation: In a sluggish real estate market, finding another buyer willing to match the offered price may be challenging.
Advantage: Accepting a conditional offer becomes more appealing in a slower market, especially if the risk of the deal falling through is low.

4) Flexible Closing Options:
Explanation: Conditional offers may open the door to negotiating a flexible closing arrangement. This is advantageous if you have specific timeline considerations, such as needing more time to find your next home.
Advantage: A flexible closing date contributes to a smoother transition between properties, allowing for effective move planning.

5) Increased Buyer's Investment:
Explanation: Buyers attaching conditions often invest more time and effort into the deal, increasing the likelihood of a successful transaction.
Advantage: Knowing that buyers are emotionally and logistically invested instills confidence that they will work diligently to meet conditions and finalize the deal.

Cons of Accepting a Conditional Offer:
1) Potential Delays:
Explanation: There is always a risk that the condition won't be met, leading to delays or even the potential collapse of the sale.
Drawback: Uncertainties surrounding the condition can introduce delays, and there's no guarantee that the deal will successfully close.

2) Missed Opportunities:
Explanation: While waiting for conditions to be fulfilled, other potential buyers may lose interest and explore alternative properties.
Drawback: Time spent waiting could result in missed opportunities with other buyers ready to move forward without conditions. (The inclusion of an escape clause can minimize this risk)

3) Financing Risks:
Explanation: Buyers may face challenges in securing financing, even with a pre-approved mortgage certificate, leading to potential complications.
Drawback: Financing-related issues could emerge during the condition fulfillment period, putting the deal at risk and causing uncertainties in the overall selling process.

4) Market Changes:
Explanation: Real estate markets are dynamic, and conditions can change rapidly. Waiting for condition fulfillment exposes the agreed-upon price to potential market fluctuations.
Drawback: The longer the condition fulfillment period, the more susceptible the agreed-upon price is to changes in the market, potentially affecting the overall value of the sale.

Escape Clauses:
In certain conditions, an escape clause may be included, allowing the seller to put the buyer on notice if another offer is submitted. If another offer is received during the conditional period, the seller can then give notice to the first buyer, stipulating that conditions must be waived or fulfilled within a specific time frame, such as 24 or 48 hours. Once the first buyer receives this notice, if they are unable to remove their conditions within the specified time frame, the first offer is bumped, and the second offer takes precedence.

Deciding whether to accept a conditional offer becomes a nuanced process, especially when considering the presence of escape clauses. While flexible closing options and increased buyer investment remain significant pros, potential delays and missed opportunities persist as cons.

If you have any questions or concerns, reach out to me today—your successful home sale remains my top priority.

-Tom Sangster, REALTOR®, Royal LePage Frank Real Estate, Brokerage
Making Real Estate Work For You in Peterborough & The Kawarthas