What Happens When Nobody Says Anything

As Realtors, you're the ones drafting the Agreement of Purchase and Sale.

And conditions are one of the most important parts of that document. I'm seeing more of them drafted from scratch for specific situations, not just pulled from the OREA standard clauses.

If you're going to be good at drafting, you need to understand the mechanics behind what you're building.

I made a "Conditions 101" video earlier this week, and I've written about the anatomy of a condition here before.

But today I want to go one layer deeper: the different options of fulfillment.

Every condition falls into 1 of 3 categories. These get taught in the real estate course, guaranteed to show up on the exam... but very few agents walk away with a real understanding of how they work in practice.

Condition Precedent

This is the standard. If you've written a conditional offer, you've almost certainly used one.

A condition precedent means something has to happen before the deal becomes firm.

The buyer has a window to complete their due diligence, and if they're satisfied, they deliver written notice to the seller confirming the condition is fulfilled. Once that happens, the deal goes firm.

If the buyer doesn't deliver that notice by the deadline, the deal is null and void and the deposit is returned.

It also usually includes an option to be waived.

Here's a common example using financing:

"This Offer is conditional upon the Buyer arranging, at the Buyer's own expense, a new first mortgage satisfactory to the Buyer in the Buyer's sole and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller not later than [date] 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."

The important thing to notice is the default outcome. If the buyer does nothing, the deal dies.

The buyer has to take action to keep the deal alive.

This is what 97% of conditions look like.

Condition Subsequent

A condition subsequent looks very similar on paper. But the default outcome flips.

Instead of the buyer having to deliver notice that the condition is fulfilled, the deal is treated as firm unless the buyer delivers notice that the condition is not satisfied.

Here's what that looks like using the same financing example:

"This Offer is conditional upon the Buyer arranging, at the Buyer's own expense, a new first mortgage satisfactory to the Buyer in the Buyer's sole and absolute discretion. This condition shall be deemed to be fulfilled unless the Buyer gives notice in writing delivered to the Seller not later than [date] that this condition is not satisfied, in which case 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."

The difference is in the bolded language. If the buyer does nothing, the deal goes firm.

The buyer has to take action to get out of the deal, not to stay in it.

That's a significant shift. Same condition, same due diligence, but the consequences of silence are completely reversed.

True Condition Precedent

This one is different from both.

A true condition precedent is a condition that neither the buyer nor seller can fulfill or waive.

It depends entirely on a third party.

The example I always use is a condition on severance consent.

I've facilitated a few Agreements of Purchase and Sale for land that was conditional upon the municipality granting a severance.

In these cases, the municipality has to approve the severance before the transaction is legally possible. The buyer can't fulfill that condition. The seller can't fulfill it. Neither side can waive it. It's completely outside both parties' control.

The deal simply cannot proceed until the third party acts.

You won't see these as often as the first two, but when you do, recognize them for what they are. No amount of negotiation between buyer and seller changes the timeline. The deal waits.

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Understanding your options as a drafter puts you in a better position to build the right fulfillment mechanism for the deal and your client's needs.

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REAL ESTATE CONDITIONS EXPLAINED: DON'T SIGN UNTIL YOU WATCH THIS