Making an offer to purchase a home is a monumental step. The document you sign, the Agreement of Purchase and Sale, is a legally binding contract that, once accepted, commits you to a massive financial and personal decision. But what if you have some lingering questions? What if you need to confirm your financing, or you want a professional to look for hidden issues before you’re fully locked in?

This is where the conditional offer comes in. It is one of the most powerful tools available to a homebuyer in Ontario—a “safety net” that allows you to secure a property while giving you the time and opportunity to perform your due diligence. Understanding how to use conditions effectively is key to a safe and successful real estate transaction.

What is a Conditional Offer?

A conditional offer is a formal, legally binding offer to buy a property that includes specific clauses, known as conditions, that must be met for the deal to proceed. Think of each condition as an escape hatch. If a specific condition is not met or waived by the buyer within a set timeframe, the entire agreement can become null and void, and the buyer’s deposit is returned in full.

This stands in stark contrast to a firm offer in Ontario, which contains no conditions. Once a firm offer is accepted by the seller, the buyer is legally obligated to close the deal, regardless of any issues that may arise with financing or the property itself.

The Anatomy of a Conditional Offer: Common Conditions Explained

While conditions can be written to cover almost any concern, a few are standard in Ontario real estate and serve to protect buyers from major risks.

1. The Condition of Financing This is the most common and arguably the most important condition. Even if you have a mortgage pre-approval, it’s not a final guarantee of funding. The lender must also approve the specific property you are buying through an appraisal and final underwriting. This condition gives you a set number of business days (typically 3 to 5) to confirm with your lender that you have secured a final, unconditional mortgage commitment. Without this condition, you could be legally bound to buy a house you can’t get a mortgage for.

2. The Condition of Home Inspection This condition gives you the right to have a qualified professional conduct a thorough home inspection in Ontario. The inspector will assess the home’s major systems, including the roof, foundation, plumbing, electrical, and HVAC. If the inspection uncovers major, previously unknown defects that are unacceptable to you, this condition allows you to terminate the agreement. It is your single best defence against buying a property with significant hidden problems.

3. The Condition of Status Certificate Review (for Condominiums) If you are buying a condominium, this condition is essential. It provides your lawyer with a set period (usually 10 days) to obtain and review the condo corporation’s Status Certificate package. This package is a detailed report on the financial and legal health of the condo building. It reveals the state of the reserve fund, whether any special assessments are planned, if there are any pending lawsuits, and outlines the corporation’s rules and bylaws. A negative review from your lawyer can be a valid reason to walk away from the deal.

4. The Condition of Sale of Buyer’s Property (SPP) This condition is used when a buyer needs the proceeds from the sale of their current home to finance the purchase of the new one. It makes the offer conditional on the successful sale of their existing property by a certain date. This condition is complex and adds a significant layer of uncertainty for the seller, making it less common and less attractive in competitive market situations.

The Mechanics: How Conditions Work in Practice

Every condition in your offer operates on a strict timeline and has a clear outcome.

  • The Timeframe: Each condition has a specific deadline, for example, “This condition is for the benefit of the Buyer and expires at 11:59 p.m. on the 5th business day following the date of acceptance.” Missing this deadline can have serious consequences.
  • Fulfillment or Waiver: If you are satisfied that a condition has been met (e.g., your financing is approved), you will sign a document called a “Waiver” or a “Notice of Fulfillment.” This document is delivered to the seller, and it removes that specific condition from the agreement. Once all conditions have been waived, the agreement is firm.
  • Non-Fulfillment: If a condition is not met to your satisfaction (e.g., the home inspection reveals a major structural issue), you simply do not sign the waiver. Once the deadline passes, the agreement automatically becomes null and void.

The Strategic Decision: When to Use a Conditional Offer

The decision to include conditions in your offer is not just about safety; it’s also about strategy, which often depends on the current market climate.

In a balanced or buyer’s market, conditional offers are standard practice. Sellers expect them, and buyers can and should use them to perform their due diligence without pressure.

In a hot seller’s market, and especially in a bidding war in Ontario, the dynamic shifts dramatically. A seller receiving multiple offers will almost always favour a firm offer over a conditional one, even if the conditional offer is for a slightly higher price. The certainty of a firm deal is incredibly valuable to a seller. In these scenarios, buyers may feel immense pressure to submit a firm offer to be competitive.

If you find yourself in this situation, it is critical to try and mitigate your risk beforehand. This might involve paying for a pre-offer home inspection before you submit your offer, or working very closely with your mortgage broker to get as close to a final approval as possible.

Ultimately, a conditional offer is a buyer’s most important protection in a real estate transaction. It ensures you have the opportunity to be certain about the financial and physical aspects of your purchase before you are irrevocably committed. Working with an experienced real estate agent under a Buyer Representation Agreement (BRA) is essential. They can help you draft effective conditions and provide the strategic advice you need to decide when and how to use them to your best advantage.