What is a Condition in real estate?
A condition is a term in a contract that has an expiration attached to it. Without the condition being removed before the expiration, the contract falls apart.
Real Estate Agent Explains Conditions in Real Estate
Everyone has heard this before: “I’ll do this favour for you on one condition.” A condition can be anything at all. And any contract can have a condition – not just real estate contracts.
To help illustrate a condition take this scenario for example:
A boy agrees to mow a neighbour’s lawn for $20 if the neighbour puts the lawnmower out before 5 p.m. on Friday. If the neighbour doesn’t put that lawnmower out before that time, there is no contract and the boy does not have to mow the lawn; that contract expires with a condition that is unsatisfied.
So, a condition is an issue that needs to be resolved before a certain time.
In real estate, there are common purchase contract conditions like the buyer obtaining adequate financing, or the buyer doing a home inspection before they buy – but a condition could be anything. That is, if the buyer talks to the bank and the bank won’t lend them the money for the house, they aren’t going to want that house anymore and will not remove that condition. Also, if a buyer inspects the house and finds that it is in really bad shape and doesn’t want to buy the house, they would say they aren’t removing their condition and the contract is no longer enforceable.
If the inspection shows no real problems with the property and the lender agrees to lend the amount needed for a mortgage, the buyer will remove their conditions and the house will be officially sold.
Why Does it Matter?
Conditions are found on almost all real estate purchase contracts. It is rare to find contracts that are unconditional. No home is sold if a condition on a contract not met or removed – that is why we say there is a sale “pending conditions” before that the property isn’t actually sold. That is there are things that still need to be done before the contract is complete and enforceable. Many contracts fall apart when conditions are not met. Both buyers and sellers of real estate need to understand how important conditions are and how they can affect the sale of a property.
