Conditionally sold homes exist in a grey area between “for sale” and “sold”. They are still advertised for sale on realtor.ca and there can still be weekend open houses. Usually, but not always, homes that are conditionally sold still allow for agent showings.
The conditional element
The most common conditions are mortgage financing and home inspection. These conditions normally require five business days to get through. What this means for the seller is that he has successfully sold his home pending the outcome of the buyer getting the mortgage he likes and perfor
ming a home inspection and being satisfied with those results. There may be a little more back and forth but essentially that’s it. Sold conditional —> one week —> sold firm.
However, there is a chance that the buyer will not qualify for the mortgage he wants or that the home inspection will turn up an issue that cannot be overcome. In these cases, one of the conditions of the sale will not be satisfied and the house will go back onto the open market.
The Sale of Buyers Property condition
There is another condition, a longer one that home sellers sometimes accept, the Sale of Buyer’s Property (SBP) condition. This condition gives the buyer three, four or maybe up to six weeks to sell his present house (so that he can buy his next house). If the seller accepts a SBP condition, he has conditionally sold his house pending the successful sale of his buyer’s house. Like with the other two conditions mentioned above, the sellers house is now sold, but in the grey zone. It will still appear on realtor.ca, there may still be open houses and showings are still encouraged.
As a general rule, I do not show conditionally sold homes.
I do this because:
- they most often firm up
- save time for me and my clients to look at homes that aren’t sold
- the best houses sell fast. Your best chance is when the house hits the market
- the second buyer will pay too much.
Let me explain that last point
Your offer will have to be compellingly good enough for the seller to give up on the offer he has in hand to start fresh with you. That means your offer will have to be for more money and/or have fewer conditions. Most homebuyers are not willing to give up on home inspections and the security of having a finance clause in their offer. That means they will may have to pay full price or maybe even more to bump the first offer. Nobody likes to pay full price. When you compete, you pay too much. Offering on a conditionally sold house is a form of competing.
Nothing is black and white in real estate
The first rule of the 365 rules about real estate is, “Rules are made to be broken”. I’ve called this blog post “Why I don’t show conditionally sold homes”. I don’t as a general rule but I will and I do, not because I think my clients have a good chance of buying them, but because:
- I love looking at houses and
- There are at least two benefits for my clients to see houses that are sold and those are education and information.
Education
There is a learning curve that home buyers have to travel along not only to discover their own wants, needs, priorities and compromises. They also have to learn about house values and neighbourhoods and a host of other things. When home buyers are well informed they will make good decisions. Looking at houses is an essential part of the education process.
Information
When I tour houses with clients I always ask them as we are leaving, “What do you like about this house and what do you not like about it?” It is a quick and easy way for both me and my clients to discover what is important to them.
“the second buyer will pay too much”
If the owner has already (conditionally) accepted first offer, don’t they have to give the first buyers a week or whatever time is agreed to remove those conditions?
How can the 2nd buyer even submit an offer? At most they can only do it as a backup offer right?
I’ve also heard of the 72 hour clause where the owner can hurry the 1st buyers to remove their conditions before the intiially agreed upon time.
Yes. The seller has to give the first buyers a chance to remove the conditions. A second buyer can submit an offer during the conditional phase. The seller cannot accept it until the first contract is out of the way.