Buying or selling a house can be an exciting time once the transaction is closed and moving day has arrived! However, the process itself can seem complicated, with a lot of paperwork and several terms and clauses you should understand before signing anything.

A little background research goes a long way to make everything feel less stressful. With that in mind, let’s take a look at some of the most common and misunderstood clauses you’ll encounter during your journey to a new home.

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Contingencies and Conditions

You’ll often see the words “contingencies” and “conditions” used interchangeably. Though they are related concepts, there is a slight difference between the two terms. 

  • A contingency is a more general requirement that must be met before the sale proceeds. For example, a buyer might be interested in the home, but only if the window coverings and appliances are included.
  • A condition is more specific and concrete. The offer will specifically state that the buyer will buy the home under the Condition of a Home Inspection. 

To put it even more simply, contingencies are more of an overall rule, and conditions are the specific things that fall within those rules.

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Escape Clause

As you can imagine, conditional offers can be troublesome for the seller. They may have a deposit on a house already, and are depending on a seamless sale so they can go ahead with their own purchase. 

In residential real estate, a homeowner who receives a conditional offer can accept while adding a condition of their own. Enter the “Escape Clause,” which allows the seller to potentially cancel a previous contract if they receive a better offer.

When a second offer comes in, the seller will inform the original buyer, who then has approximately 24 to 48 to either drop their conditions or void the contract. 

Deposit and Down Payment

A deposit and down payment are another set of concepts that confuse buyers and sellers alike. Once again, they are related but different. 

  • The down payment is the total amount that the buyer needs to have upfront to qualify for a mortgage. This can range anywhere from 5 to 20%, depending on the purchase price of the house. For example, If the price is $1 million, a 20% down payment is required, which works out to $200,000.
  • The deposit is the part of the down payment the buyer pays within 24 hours of the seller accepting the offer. The amount of the deposit can be negotiated, but is typically 5% when purchasing in the GTA. That means you’d pay $50,000 immediately for that million-dollar house. The rest of your down payment is due on your closing date before you get the keys. When in a multiple offer scenario, a higher deposit can give you an advantage over other buyers. It shows the seller that you the capital behind you to be able to close the transaction.

Do you want to learn more about buying or selling in Halton or the GTA? The resources below are a great place to start:

Property Disclosure Statement

The seller is legally obligated to disclose any known latent defects about the property to the buyer. This opens up another question: what is a latent defect? It means something that a buyer can’t detect during a normal viewing of the property. 

Electrical problems and plumbing issues are latent defects since the buyer isn’t going to be able to see those when walking through the home. However, a broken window would not be a latent defect because it should be easily detectable.  

Stigmas are another issue in property disclosures, like if the house is reportedly haunted or criminal activity has occurred. No laws state that you must disclose rumours of paranormal activity.

Still, there is an expectation to treat the buyer with fairness and honesty. You don’t have to bring it up, but you shouldn’t lie about it either.

A homeowner’s instinct may be to try to hide any serious issues that could jeopardize the sale. However, if the buyer can prove you deliberately withheld information, it can open the doors to a legal battle you’d rather not engage in. 

Do you have questions about Halton or the GTA? You can depend on me for accurate and unbiased answers so you can make informed decisions. Call 416-884-7925 or email today for more information.