Difference Between a Conditional and Firm Offer

When buying or selling a home, it’s critical to understand the difference between a conditional and firm offer.

A conditional offer is a contract between a buyer and seller in which the sale of a house hinges on specific conditions. These conditions often favour the buyer more than the seller. The most common conditions are usually based on financing and a home inspection.

A financing condition means the buyer’s offer only works if they can get a loan or mortgage to pay for the house.

A home inspection condition means the buyer wants to purchase the house but first, they need a licensed home inspector to look for major issues and provide a report. If there are problems, the buyer has the option to re-negotiate the deal and they might be able to lower their offer to cover the cost of repairs.

Your Realtor will set a deadline for these conditions to be met, usually five days.

In the case of a condominium, a third condition is often included in an offer: status certificate. This condition gives the buyer’s lawyer some time, generally a few days, to review a specific document that contains information regarding the operational, legal and financial health of the condo corporation, as well as the status of the individual unit.

If any of these conditions aren’t met, the buyer can back out of the deal without penalty, the offer becomes void and the seller must return the deposit in full.

A firm offer is a condition-free bid. This type of offer is most commonly used in a seller’s market or when more than one buyer is bidding on a property to beat out the competition. If the offer is accepted, the deal is firm. This means that if the buyer backs out, they will be penalized. Consequences may include losing the initial deposit, which is at least 5% of the purchase price, and even being sued.