Last Updated on May 1, 2024

What Is the Most Common Condition a Buyer Uses on a Purchase Contract?

By Alan F Macdonald

Short Answer

Financing.

Long Answer

A financing condition allows the buyer to check back with the bank to make sure everything is OK.

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When a buyer puts an offer on a property, they offer a deposit to show their intent. If an unconditional offer is made and the buyer cannot get a mortgage for whatever reason, that deposit is often forfeited.

Because of this danger, a buyer almost always makes an offer that is subject to one or more conditions. A condition on the purchase of a home could be literally anything both the buyer and seller agree on, but the most common condition is adequate financing.

When someone goes to a lender for approval on a mortgage, they will often know how much they can spend on their new place, but there are some variables a bank cannot account for when they pre-approve or pre-qualify a buyer. Anyone lending money will want to know whether the collateral for the loan (in this case, the home itself) is worth enough to cover that loan should the borrower default. That means the bank is going to want to check out the property – probably do an appraisal to make sure everything is ok. It’s variables like this – value of the home – that keeps someone from making an unconditional offer because they need to check back with the bank first.

A financing condition allows the buyer to check back with the bank to make sure everything is OK. The bank can then look at the property and do their checks to make sure they would be willing to provide financing. If the bank says it’s good, then the condition can be removed. If the bank says ‘no’, then the deal falls apart because the condition cannot be met.

Some home buyers will choose not to have a financing condition when purchasing property. If you pay cash for a property, you won’t need financing at all, and so the condition isn’t applicable. Other people may not have a financing condition because they are forced by the seller to make an unconditional offer or they simply choose not to have a financing condition. Whereas this might not be the safest bet, it is up to the buyer whether or not they want to have a conditional offer.

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