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Aug 2022

Conditional Agreements of Purchase and Sale: A Review of the “Sale of Buyer’s Property” Condition

By Slonee Malhotra

With the shifting market, we are now seeing the return of conditional offers. The most commonly used conditions are for financing, home inspection or home insurance. As properties sit on the market, we are also seeing the return of the sale of buyer’s property condition. This condition stipulates that if the buyer’s property does not sell within a specified timeframe and the buyer does not advise the seller in writing that the property has been sold, then the APS is null and void and the deposit is returned to the buyer. An example of the standard condition has been included below:

This Offer is conditional upon the sale of the Buyer’s property known as ______________________ Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than ________ on the ______ day of ________________ , 20 _____ , that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller as aforesaid within the time period stated herein.

As drafted, this condition essentially provides the buyer with a free pass to terminate the transaction if the buyer does not secure a satisfactory offer. The condition places no positive obligation on the buyer to hire a realtor, accept offer, set a reasonable asking price, or stage the home.

Fortunately, case law confirms that is a common law duty to act in good faith. In the context of real estate transactions, the general principle of “good faith” has been interpreted as an implied duty of honesty in the performance of the contract.[1] This requires parties to make reasonable efforts to satisfy their part of the bargain.

But what constitutes a reasonable effort? So, what can the average Seller do to protect themselves if an offer includes a sale of buyer’s property condition? Our recommendation is to be as specific as possible. Here are some suggestions:

  1. Require the buyer to sign an agreement to hire a real estate agent to list the buyer’s property within a certain number of days of entering into the APS;
  2. Specify that the buyer is to disclose to the seller the number of offers presented to the buyer during the conditional period;
  3. Specify that the list price of the buyer’s property is to be in line with market value and include a mechanism to reduce the list price accordingly if no offers are received within a certain number of days; and/or
  4. Require the buyer to accept an offer if such offer is within 5% of the range of the list price and conditional on x,y, z.

Contact one of our real estate lawyers to discuss further.


[1] Acting in Good Faith – What does this mean in a real estate agreement? Online: Jay Teichman https://www.jayteichman.com/act-in-good-faith-duty/.

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