Real estate terms differ from conditions
What are “terms and conditions” in a real estate offer? Are they two different things?
The words “terms” and “conditions” are found in most written real estate offers in Ontario, and are included to protect both the buyer and the seller.
Since they are two very distinct items, let’s talk about “terms” first.
A term describes any expectation documented in an offer that a buyer or seller may have about what’s included with the property or actions to be taken before the transaction closes.
For example, a buyer may want the kitchen appliances included. Other common terms address completion of certain renovations before the closing date, or a new survey of the property prepared at the seller’s expense.
When defining a term, it is best to be very specific. Your real estate salesperson will help you draft the terms in your offer. You may also want to consult your real estate lawyer.
Let’s say your home inspection revealed roof leaks. You can include fixing the roof and repair of any water damage as a term. If you’re not happy with the way the seller fixed the issue, you may have to redo the work yourself. However, you also have the option to try to negotiate a financial incentive or price reduction and do the repairs yourself after you take possession.
Once the buyer and seller agree to the terms in the buyer’s offer, it becomes a legally binding agreement. If a seller fails to fulfil the terms included in the agreement, there may be legal consequences and a delayed closing date. If that happens, you should consult your real estate representative and lawyer on how best to proceed. Now, let’s look at conditions. A condition is an action documented in a clause in the agreement that the buyer needs to waive, or perform, by an agreed-upon time before the sale becomes binding.
For example, depending on their plans for the property, buyers may wish to consider making an offer conditional on a satisfactory home inspection. This can protect you by allowing you to exercise your rights to opt out of the transaction if the inspection uncovers a major issue with the home. Be aware that you must use the home inspection condition in good faith and not as an excuse to get out of a binding agreement if you get cold feet.
A condition on financing is also an important layer of protection for a buyer. It gives you the opportunity to secure a mortgage for the property before proceeding.
Conditions typically provide a specific time for the buyer to satisfy them. It’s important that the conditional period be only long enough to do what needs to be done, in case the agreement falls through. This way the seller can resume marketing to other prospective buyers quickly.
Finally, bear in mind that every real estate agreement or contract is unique. That’s why it’s important to work with your representative to make an offer or counter-offer specific to your transaction.
Joe Richer is registrar of the Real Estate Council of Ontario (RECO) and contributor for the Star. Follow him on Twitter: @RECOhelps. This column is for general information purposes only and is not meant as legal or professional advice on real estate transactions.