Your Guide to Conditions & Clauses on a Residential Real Estate Agreement

Posted by Lisa Mueller on Friday, February 12th, 2021 at 1:07pm.

When you buy a home with a REALTOR®, you gain peace of mind knowing they’re trained professionals who work with property purchase contracts on a daily basis. Having said that, you are still the principal on this contract and you should never sign anything that you do not fully understand. Let’s dig a bit deeper into a typical real estate purchase agreement, specifically looking at conditions and clauses.

Real Estate Agreement 101

An Agreement of Purchase and Sale is a written contract between a seller and a buyer for the purchase and sale of a property. In the agreement, the buyer agrees to purchase the property for a certain price, provided that a number of terms and conditions are satisfied. 

The process begins when the purchaser makes an offer, which is irrevocable for a certain time period. If there are no counteroffers and the agreement is signed by the seller within the time period the offer was left open, then the agreement becomes legally binding. At this point the agreement cannot be cancelled unless both parties agree. If the offer is not signed before the offer expires, it will become void.

Fixtures are improvements made to a property that are attached or cannot easily be removed without causing damage to the property. Examples include: hot water heaters, built-in cabinets, light fixtures, etc. These items are assumed to be included in the sale of the home, unless they are specifically excluded in the agreement.

Chattels are moveable items of personal property, and must specifically be listed in the Agreement if they are to be part of the sale of the home. Examples include: appliances, lawn and garden equipment, blinds or drapes, etc. 

The requisition date is the time within which the homebuyer has to examine the title, and complete all other searches. It is within the buyer’s best interest to do a number of searches to ensure that there are no problems with the property. These include things such as searching the registered ownership of the property with the land registry, checking that the property complies with zoning regulations, and searching for any outstanding municipal work orders.  Usually the buyer’s agent and lawyer will handle this.  

The removal date is the date on which conditions must be fulfilled, waived, or removed for the agreement to be binding and for the transaction to proceed to closing. 

Closing arrangements are when all relevant documents are exchanged by the lawyers on both sides of the agreement and the sale is finalized.  

The completion date or possession date is the date that the seller must give vacant possession of the property to the buyer.

What is a Conditional Offer

A conditional offer is an agreement between two parties that an offer will be made if a specific condition is met. A condition is defined as “a requirement that is fundamental to the very existence of the offer.” If there is a break of a condition on the purchase agreement, the buyer is allowed to get out of the contract and the full amount of the deposit is returned.

Common Conditions on an Offer to Purchase

There are numerous types of conditions that might be included in the Offer to Purchase, including:

Financing Condition - This offer is conditional upon the buyer obtaining approval of a mortgage on the property in the amount set forth in the agreement on or before a given date.

This condition is typically included to protect the buyer in the case that they are unable to secure the required financing, causing them to lose their deposit and potentially being sued by the seller for non-completion of the transaction. 

Subject to Home Inspection - This means that the offer is conditional upon the inspection of the subject property by a professional home inspector, and the obtaining of a report satisfactory to the buyer in their sole discretion on or before a given date.

The home inspection clause is standard and appears in almost every residential real estate transaction. This condition gives the buyer the right to have the home professionally inspected by a certified home inspector to evaluate the house that is being sold. This condition is the buyer’s way of being protected from the unknown deficiencies in the home. The house must pass the inspection for the purchase to proceed or the buyer and seller may further negotiate their agreement to account for the findings in the home inspection.

Subject to Encroachment Check - This means that the offer is conditional upon the buyer obtaining and approving a satisfactory encroachment check on or before a given date.

An encroachment check will help the buyer determine if the building(s) on the land comply with zoning bylaws or if there are any encroachments by building(s) onto adjacent lands. The survey will also determine whether any building(s) from neighbouring lands encroach upon the subject’s property. A recent survey can disclose the location of fences to the property boundary and if there have been recent additions to the property. Lastly, the survey helps to determine whether anyone else may have a claim against the subject property or if any rights of way or easements exist.

Subject to Gas Line Encroachment - This means that the offer is conditional upon the buyer obtaining and approving a satisfactory gas line encroachment check on or before a given date. 

This condition is usually standard, and is simply a request submitted to SaskEnergy to facilitate an inspection of the natural gas facilities at the property. Encroachments are classified in the following ways:

1. A pipeline encroachment is any building or structure located over, or in some cases near, the natural gas pipeline or facility, including facilities that are not situated in an easement. A natural gas facility may include, but is not limited to, the pipeline itself, regulators, shut-off valves, meters or gas mains.

2. An easement encroachment generally consists of any tree, shrub, pit, well, foundation, pavement, building, or structure located on a pipeline easement. Urban pipeline easements are identified on the property title.

Subject to Property Information Disclosure - This means the offer is conditional upon the buyer obtaining and approving a satisfactory property information disclosure report on or before a given date.

A property information disclosure statement is provided by the City of Saskatoon or the necessary municipality at the request of the buyer. The information provided reflects the results of a search of existing building records, including building code, plumbing code, and deficiencies of the property at the time of the last inspection.

The report will also outline all building permits that have been issued for the property and whether there were any deficiencies at inspection. This report will help the buyer determine whether there has been any unpermitted work done on the property and if any deficiencies may exist.  

Subject to Property Condition Disclosure Statement (PCDS) - This means that the offer is conditional upon the buyer viewing and approving the PCDS on or before a given date.  

A Property Condition Disclosure Statement is a document completed by the homeowner at the time of listing the home for sale. In this report, the seller is required to disclose defects that they are personally aware of. The seller is responsible for the accuracy of the answers in the Disclosure and can be held accountable by law for any inaccuracies they knowingly provide.  

Making Your Own Conditions

Of course, you can also add any additional conditions that you feel are important for the seller to consider your offer. These include the sale of your own property, removal of garbage from the back yard, leaving window treatments, appliances, special lighting, etc. While the conditions are meant to protect you and you should take advantage of them, beware of including too many in the offer because you may lose the deal if the seller should reject your offer. Your experienced local REALTOR® will be able to help you best define which conditions to include in your offer, and guide you through the process!

 

Completing an Agreement of Purchase and Sale can be complicated and technical. Before the Agreement becomes final, it may get modified as the result of negotiations between the buyer and the seller, and counteroffers presented to the buyer by the seller. Be certain that you understand all the terms of the Agreement and review them with a real estate professional before finalizing the agreement.

 

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