Conditions in an offer in Ontario: financing, inspection and the status certificate

The short answer

Conditions in an offer in Ontario let a buyer make the purchase depend on something that has not happened yet. This post covers the three a first-time buyer in Markham should understand first: financing, a home inspection and, for a resale condo, a review of the status certificate.

The Real Estate Council of Ontario (RECO) tells buyers in its buyer’s checklist that, if possible, they should make an offer conditional on mortgage financing, a home inspection, the sale of an existing home or other factors that are important to them. It says these conditions “can provide you with additional assurances and protection.”

The pressure can run the other way. RECO notes that when markets are extremely active and you really want a particular home, skipping an inspection condition can be tempting. Here we explain what each condition does, what the official sources say about it and what you would be relying on if you left it out.

How conditions in an offer in Ontario work

An offer is more than a price. CMHC says an offer usually includes the price, the amount of the deposit, the date when the offer is no longer valid, a request for a current land survey and “any other conditions that go with the offer, including property inspection and approval of mortgage financing.”

A CMHC guide for newcomers published in 2011 is direct about what happens once a seller signs: “If the offer is accepted by the seller, it is legally binding.” The same guide says that if any of the conditions are not met, “you can change or cancel the offer, even if the seller has already accepted it.” Take that as the general idea rather than the answer for your deal. Your options depend on how your offer was written, so ask your lawyer. Our post on the deposit on a house lists what to ask about getting the deposit back.

Condition	What it lets you check	Who can help
Financing	Whether your lender gives final approval	Your lender or mortgage broker
Home inspection	Defects you could not see on a showing	A home inspector
Status certificate review	The condo corporation’s finances and rules	Your lawyer
Sale of your existing home	Whether your current home sells first	Your agent and lawyer

The exact wording and the deadline for each condition are written into the agreement. CMHC suggests talking to your lawyer before you make an offer. It also says to be sure you are “prepared to live with everything that is included in your offer before you put it in writing.”

The financing condition

A pre-approval does not settle the mortgage question. The Financial Consumer Agency of Canada (FCAC) says a pre-approval shows the maximum a lender may lend you and at what rate, but “this process does not guarantee your approval for a mortgage.”

FCAC is plain about why a pre-approved buyer can still be turned down:

• “A lender could refuse you for a mortgage even if you’ve been preapproved.”
• “Before a lender approves your loan, they’ll verify that the property you want meets certain standards.” Those standards vary from lender to lender.

The home itself matters too. FCAC says the approved mortgage amount “will depend on the value of the property and the amount of your down payment.” CMHC makes the same point about timing. Even with a pre-approved mortgage certificate, you must still meet with your bank or credit union “during the conditional offer period” to get final approval. A financing condition gives you that time before the deal is firm.

If you do not get the mortgage you applied for, FCAC says other options may include a lower mortgage amount, a higher interest rate, a larger down payment or someone co-signing with you. Those are easier to weigh while a condition is still open than after you are committed.

A pre-approval does have value. FCAC says lenders may let you lock in an interest rate for 60 to 130 days, depending on the lender. Our post on the mortgage stress test explains how lenders test what you can carry. Our first-time home buyers guide covers the down payment rules.

The home inspection condition

RECO calls the home inspection condition “one of the most common conditions in an offer to purchase a property.” Its reasoning is that the person selling may not be aware of property defects and a seller property information statement is based only on their personal knowledge.

The condition also gives you a point to talk about what the inspection finds. CMHC says you and your real estate agent will have to discuss whether the condition of the home warrants withdrawing your offer or how the repairs may affect the price. RECO’s checklist adds that your offer should be clear if certain renovations or repairs need to be completed before closing. If a seller offers an existing report, Ontario says buyers should have their own home inspection done too.

Our post on what a home inspection covers and misses goes through the inspection itself, so we will not repeat it here.

The status certificate condition for condos

On a resale condo, CMHC says the certificate “should be included as a condition in the Offer to Purchase.” Its condominium guide says you should make any offer to purchase “conditional on a satisfactory review of these documents.”

The timing is the reason this condition matters. Ontario says that when you buy a resale condo, “there are no rules in place (in legislation) outlining a set time” when you can cancel your purchase without penalty. In other words, a resale buyer has no cooling-off period to fall back on, so any time to review the documents has to be built into the offer.

The Condominium Authority of Ontario (CAO) says corporations must provide a certificate within 10 days and can charge up to $100, including all applicable taxes. It says buyers should review these documents with their legal counsel. Ontario notes that the buyer may request and pay for the certificate. Our post on status certificates in Markham explains what to look for in one.

The sale of your existing home and other conditions

RECO lists the sale of your existing home as a condition to consider. It applies to a buyer who already owns a home, so that buying the next one is tied to selling the first. RECO’s checklist also asks whether your closing date lines up with when you need to move out and tells you to have a contingency plan in case the dates do not match.

RECO also lists “other factors that are important to you.” The details depend on the property. CMHC lists a request for a current land survey as a normal part of an offer. The point is to name in writing anything the purchase depends on, rather than assuming it will work out.

Waiving conditions in a bidding war

RECO’s advice for competing offers is to think twice before waiving conditions. It suggests setting ground rules in advance about what you want from a home, what you are willing to spend and what conditions must be met, then sticking to them.

It helps to be specific about what you take on when a condition goes.

If you waive	You are relying on
Financing	Final approval after you are committed, which FCAC says is not guaranteed by a pre-approval
Home inspection	What you could see, plus a seller statement based only on the seller’s personal knowledge
Status certificate review	Whatever documents your lawyer reviewed before you made the offer, if any

Our guide to how multiple offers work in Ontario covers offer dates and what the seller’s agent can tell you.

Before you write a conditional offer

1. Get a pre-approval and ask your lender what it needs from you and the property before final approval.
2. Decide which conditions you will not give up, before you see the house you want.
3. Book an inspector you can reach quickly, so the inspection fits inside the condition period.
4. For a condo, arrange for your lawyer to review the status certificate.
5. Ask your lawyer to read the offer, including every condition and its deadline, before you sign.
6. Ask what happens to your deposit if a condition is not met.

Our buyer services page explains how we work with first-time buyers through the offer. If you would like to talk through which conditions make sense for a home you are watching, contact us.