The Give and Take of a Conditional Offer
There isn’t a week in real estate where I don’t find myself having a lengthy conversation about offer conditions. You might think that it’s fairly easy for buyers to understand conditions – and you’d be right! However, what can be a little more nuanced is the path to understanding what a condition means to the other side. That context – how and why it impacts the seller – is key. So let’s break it down.
The Basics of Offer Conditions
As a buyer, conditions exist to protect you and give you time to conduct due diligence before fully committing to a purchase. That might mean working through steps like formally securing financing, having the home inspected, reviewing a condominium's status certificate, or investigating something specific about the property.
Commonly, buyer conditions contain an important phrase: “in the Buyer’s sole and absolute discretion.” Simply put, that means the buyer has the right to decide whether or not the result of their due diligence is satisfactory. Wording varies, but that is the general idea.
Now, as a buyer, you can include whatever conditions you want in an offer. But the seller doesn't have to agree to them – and every condition will affect how they view your offer. That last part is really important for buyers to understand.
From the Seller’s Perspective
To really break this down simply, the conditions that you – as a home buyer – put into your offer to purchase to protect yourself? The seller sees those as uncertainty. Fair and to be expected, maybe, but uncertainty nonetheless.
Sometimes I explain it like this: when you put a condition into an offer, it might go from strong to a promising ‘maybe.’ The price and closing date, for example, could be exactly what the seller wants – but until those conditions are satisfied, the sale isn’t firm. For the buyers, it’s positive and exciting, even; for the sellers, it’s limbo.
Practical costs also coincide with accepting that ‘maybe.’ Once a seller accepts a conditional offer, their listing is typically updated as such. Showings typically slow down dramatically, as buyers and their agents figure there’s no point to looking at a house that’s probably sold. Then, if the deal doesn’t firm up, the sellers are putting the property back on the market – but they’ve lost momentum and, worse, sometimes buyers assume something is wrong with the house and that’s why the deal fell through.
Conditions are Negotiation Points
It’s rare for a buyer to offer on a home without conditions – and, honestly, it’s even more rarely a good idea. Conditions protect buyers and they are vitally important. But they must be weighed carefully, phrased well, and approached as something to be negotiated with finesse.
As a buyer, a financing or home inspection condition may be completely reasonable for you to need. Still, a seller would prefer not to accept it. Two things can be true at once. So, while I’m working through the offer process with clients and we get to talking about conditions, these are the two questions I ask:
What protection does this give you? and
What uncertainty are we asking the seller to accept?
What I’m trying to find, ultimately, is a path forward that protects my buyer client – but is also reasonable enough for the seller to accept… even if, naturally, they want someone to just come in and buy the place without conditions.
Buyer protections are important and they almost always outweigh the desire to make an offer more attractive. So the goal isn’t to submit the strongest offer – it’s to submit the strongest offer that you’re most comfortable standing behind.
