When structuring the time frame of an offer dates are crucial. There is a date for submitting the deposit, lawyer review, inspection, financing, water and septic tests, tax verification, the list goes on and on.
There are two crucial dates that seem similar, but are very different. The conditions date and the closing date.
This article will simply lay out what each date means to you and how they are different to help prepare you to close your deal on time and successfully.
The conditions of your offer are the buyers way out. Once the offer is accepted the buyer will need to get to work with their due diligence. Essentially, if they find something they do not like about your property, they walk, and get their deposit back in full during this time period.
Conditions can include:
-Well and Septic Inspection
-Any other clause written into the Agreement of Purchase and Sale
When the condition date has passed that means the buyer has waived the conditions and the deal is moving forward as scheduled.
That is the best case scenario, but not the most common.
What most likely happens is there is something found in the inspection that triggers a price reduction demand from the buyer.
Or, as an example, the buyers can not secure financing. The list of mishaps during a deal are endless.
An Accepted Offer Means Nothing
An accepted offer is a long way off from a closed deal.
The buyer is essentially tying up your property. Keeping it off the market to inspect and research everything about your property to then make a decision if they would like to buy.
Yes, inspections cost money to a buyer.
Yes, it takes up the buyers time.
But, submitting an offer is free.
If the buyer finds something they do not like about your property they may be walking.
The Buyers Want to Extend the Conditions Date
Sometimes the buyers simply request more time to acquire financing for the deal or to get a survey done on the property lines etc.
When your property has an accepted offer your MLS status has changed from “Active” to “Conditional”. Sending out a red flag to any potential buyers that your property is essentially off the market and wrapped up in negotiations.
Buyers are not going to schedule showings at your property when you have a conditional offer in place.
If your buyer is requesting to extend the condition date they are sending a message to you that they are still not sure about purchasing the property. You can deny their request and send the message back saying they need to firm up this deal or you are willing to start entertaining other buyers.
The Buyers Have Requested a Price Reduction
You may negotiate price three times:
Do not be surprised when a buyer sends you an amendment to the agreement of purchase and sale following their inspection stating they have found something wrong with your house and they want $10,000 off the purchase price.
Expect this to happen, and know how you are going to respond.
Depending on how hot your market is, it is typical of a buyer to try and get the price down following the initial accepted offer price.
Maybe the buyer’s lawyer has found some weird easement on the property that allows the neighbour to cross it anytime they wish.
Or, maybe that second unit in the basement has an illegal bedroom.
Whatever the reason, buyers are going to take any negative they find during the condition phase and use it against you.
Be prepared to stick to your guns and negotiate.
Prior to the closing date the buyer will do their Final Walkthrough.
After all those previous heavy negotiations the buyers get to return to your property one last time before it is theirs.
During the final walkthrough they are looking to see everything that was agreed upon has happened.
For example, the property is clean, you left that riding lawn tractor in the shed, the junk in the attic has been cleared out, etc.
I like to tell my clients to do the final walkthrough the day before the closing date. That way if anything negative is spotted, negotiations can happen prior to the closing date.
Example of the lifespan of an offer:
Example Time Frame
For this example let’s imagine you are a seller and you have an accepted offer with the conditions of lawyer approval and inspection dated September 15. The seller has waived the financing condition. The closing date is set for October 2.
They buyers have scheduled the inspection for September 13. On September 14 you get an email with an amendment to the agreement of purchase and sale attached saying they have found some mould in the attic and they want $10,000 of the purchase price to take care of the issue.
The conditions deadline is September 15! Is the clock ticking for you the seller or them, the buyers?
It is important to remember you are always in control of any offer. Do not let the other side dictate the flow or speed of the offer.
You have 3 options at this point:
-Accept their terms and move on with the deal
-Tell them to take a walk
You choose option 2 with a little sprinkle of 3 and tell them you are willing to drop the price $1,000 off the purchase price and if they want anymore they can take a walk.
They accept and the conditions are waived.
Done deal right? Time to celebrate?
You still have the final walkthrough and closing date. A whole whack of things can go absolutely insane between now and then, as well as on closing day.
For some real life examples check out the article: When Buyers Walk
Time in between
If the conditions date is set for September 15 and the closing date is on October 2, what happens during that time?
The short answer is, nothing.
The closing date can be any time agreed between the buyer and the seller that works for handing over possession of the property.
It may be a quick close where the closing date happens immediately following the conditions date, or the closing date may be months away.
It all depends what works best for the buyer and sellers current living situations.
The market has been heating up lately.
When an offer comes into your inbox, it is important to take a look at those dates.
Is the buyer tying up your property to complete their due diligence?
Be ready to fight for condition dates that work for you.