Michael’s Corner – Episode 2 – Common & Uncommon Conditions in the Purchase Contract
Welcome back to another episode of Michael’s corner, where we empower the average person with the hints, tips, tricks, and insights into the real estate world! Today we’re going to be talking about common conditions that you’re likely to come across in a purchase agreement. We’re also going to touch on a few of the less common ones that you may see when buying or selling Calgary real estate. So, let’s jump right into it!
First and foremost, the most common condition you’re going to find is the financing condition. Now, this is not to be mistaken with getting pre-approved. Preapproval will tell you, roughly, how much the bank is willing to lend to you. However, when it comes to the individual property, many banks will have certain stipulations on the types of homes they will and will not finance. We need to allow a certain amount of time, usually about 10 days or so, from the date your offer is accepted to allow your bank to review and possibly send out a home appraiser to make sure you not drastically overpaying for your new home.
The second most common condition is a home inspection. This should go without saying that the home inspection is there to protect you. You’ll want to hire a licensed professional and they will bring out all of the gizmos and gadgets that can look through the walls and look for heat signatures, etc. It is really cool stuff that they can do! They’re there to protect you and make you aware of any potential problems that may come up so you can decide if you’re comfortable with them or not.
Condo Document Review
Number three is if you’re looking at a condo. There’s a condo doc review condition and this is probably the most commonly glossed over one we see. Now again, I recommend hiring a lawyer or a specialized condo document review service. It has saved my clients, in many cases, tens of thousands of dollars. What do they look at in a condo document review? They will look at:
- the minutes from all the AGMs (Annual General Meetings)
- minutes of any subsequent meetings,
- the financial statements,
- the reserve funds to ensure they are up to date,
- what’s the expected income?
- are there any special assessments coming?
There is nothing worse than moving into a property and finding out a week later that you’re on the hook for $20,000. So absolutely spend the couple hundred dollars it takes to get the lawyer or a specialist to review those documents as they can alert you to any potential problems coming down the road in that regard.
Subject to Sale
The fourth most common one you’re going to come across is subject to sale. What that means is let’s say you found the home that you want to buy but you need to pull the proceeds out of your current home and a HELOC or line of credit isn’t an option for it. You don’t want to carry two mortgages? Not a problem. Most people fit into this category. A safe way to proceed with a new purchase is to put a condition in there making your offer subject to the sale of your existing home. This condition locks in the purchase agreement with a condition date, usually 30 to 90 days (although that number is obviously negotiable in the agreement), which is your window to sell your current property to move forward on the one you want to buy.
Now usually attached to that is a 48-hour clause (this is the most common but it can be as low as 24 hours or as high as 72 business hours). The idea is, let’s say the seller accepts your offer today but tomorrow they get an offer that’s just as good but without the subject to sale condition which would allow these people to move forward with the sale of their home in 10 days and not three months. Obviously, the seller is going to want to take that second offer so they are going to trigger this 48 hour clause which means you now have 48 hours to either waive that condition and firm up the deal and move forward even without selling your home, or you can step aside and the seller can take that backup offer. Your decision will be based on your situation and everybody’s a little different on that, but it is the most commonly misunderstood one that I come across because people don’t appreciate how that clause works. It’s strictly there to protect the seller so they don’t tie up the home for three months at a time while having to turn away other offers.
Now there’s also if you’re looking in country residential, acreage and things like that, there are a few other ones you’re going to find. On water systems, the septic systems, country residential property schedules as well as subdivision plans. Now we’re not going to get into that here. Frankly, acreages are a beast of their own and we’re actually going to save that for a future video. But those are four others that you can expect quite commonly on the acreages.
Less Common Conditions
Now, moving on to some of the less common conditions and clauses that you can find. Remember, there may be standard ones but you can always customize these to suit your needs. There is no saying that the seller is going to accept any of these, however, you can absolutely set this up so that you are 100% dialed in for your situation.
Quotes from Trades
Some of the less common conditions include quotes from trades. Let’s say you’re looking at a fixer-upper and you haven’t done this before and you want to make sure you can put in a condition stating that you want, typically about 10 days again, time to allow some contractors to come in and as long as those quotes are satisfactory to what you had in mind. That is there to protect you on that front.
Encroachments, By-Laws and Grow-Ops
Now there’s also things like getting approval for encroachments. Let’s say there are issues with the RPR (Real Property Report) or issues with the neighbor and fence lines and things like that. You can put a condition in there that those need to be satisfied before you move forward with the agreement. Again, to try and protect yourself. There are also some scenarios where bylaws can come into play so you’ll want to check those out. These are not very common, but they do exist out there so it’s nice to be able to give yourself the window to make sure everything is on the up and up and as you believe. In some cases, you may ask for confirmation the property was not a former grow op. Legally, the listing agent has to disclose that but sometimes that knowledge isn’t always passed on as homeowners change, so you want that kind of confirmation. And again, your home inspector can sometimes find trace elements of that if it wasn’t remediated properly.
Another common one is getting a specialist in there for more unique items. There are certain parts of the city where we have a lot of wood foundations. Right now, most of Calgary is very familiar with concrete, wood foundations can scare a lot of people. Our reality is everybody’s got their own opinion on that and I’m not going to touch on that right now, however, let’s say you do find yourself looking at a property with a wood foundation. You absolutely want to get an engineer in there to specifically look at that wood foundation because a home inspector is not going to be able to. This is a very specialized field and you want to make sure you have that clause in there to protect yourself because again, this is something that can lead to dramatic or catastrophic damages down the road.
I do hope you found all that informative. If you’ve made it this far, please be sure to leave a like on the video and comment below on topics you would like to see in the future. We keep a close eye on these so if there’s anything you want us to cover and break down for you, comment below and we’ll absolutely do our best to get to that in the future! I hope you have a great rest of your day and always make sure you have somebody looking out for your interests. Bye for now.