Your Ottawa buyer has to sell first. Underwrite their listing.

The offer that depends on a house you have never seen

The offer comes in Tuesday night. Price is fine, deposit is fine, closing works. Then Schedule A: conditional on the sale of the buyer's property on a crescent you have never driven down, with sixty days to do it.

Two years ago I would have told you to send it back unsigned. Nobody in Ottawa was accepting a sale-of-property condition, so nobody wrote one. That has changed, and on Tuesday I wrote the buyer's side of it. Here is the seller's side, because the two are not symmetrical. The buyer is asking you to carry a risk they cannot price. You can.

What you are actually signing

The clause has two halves. The first says the agreement is null and void, deposit back in full without deduction, unless the buyer tells you in writing by a set date that their house has sold. The second half, the escape clause, is supposed to protect you. You keep marketing. If another offer you like arrives, you notify the first buyer in writing and they get a short window, 24 to 72 hours depending on how it was drafted, to waive the condition and go firm or walk away.

Read both halves and notice what is missing. Nothing in there says the buyer's house has to be listed, priced sensibly, or shown. Nothing obliges them to accept an offer on it. The condition is satisfied when they say it is.

Underwrite their listing, not their promise

The first thing I do with a sale-of-property offer is pull the buyer's listing. If there is no listing yet, that is my answer. If there is, I read it the way I would read a comp.

Start with the segment, because OREB's July numbers say the odds are not the same house to house. Months of inventory is the stock of listings divided by a month of sales, so flipping it gives you a rough market-average chance that any given listing sells in a given month. Single-family sat at 3.2 months in July, which is about 31% a month, or a little better than a coin flip across a 60-day condition. Townhouses were at 3.0 months, about the same. Apartments were at 5.4 months, roughly 18% a month and about one in three over 60 days. Downtown, Ottawa Centre was at 5.6 months with a sales-to-new-listings ratio of 39.6%.

Those are averages across every listing in the stock, including the ones priced for 2022. The buyer's specific house moves the number a long way in either direction. Is it priced off the benchmark for its type, or off what the neighbour got in April? How many days has it already been up, against a citywide median of 28 and 41 for apartments? Has it already taken a price cut, and if so, what number did the market say no to? More Ottawa listings left the market unsold in July than sold. The buyer's house is one of those listings until it proves otherwise.

The escape clause does not do what you think it does

Here is where sellers get hurt. Most people read the escape clause as a right to take a better offer. It is not. It is a right to force a decision.

Once you give notice, the buyer chooses. If they waive the condition inside the window, the deal is firm at the original price and you are obligated to close with them, however much the second buyer put on the table. RECO's registrar calls this the right of first refusal, and it is the whole bargain.

A Peterborough case, Grayson v. Creasy, shows what misreading it costs. The sellers accepted $530,000 with a 24-hour escape clause, then received $703,000. They served notice, the first buyers waived their conditions inside the day, and the sellers sold to the second buyer anyway, arguing the buyers had not waived the escape clause itself. The court called that untenable, found the sellers in breach and set the starting point for damages at the $173,000 gap.

Two more things the case law is clear on. Notice has to be given exactly as the agreement says, on time and by the method written into it, or it is not notice. And the second agreement has to be conditional on the first one dying, or you have sold your house twice.

The deposit is not protecting you here

Under a sale-of-property condition the deposit goes back in full if the buyer cannot sell. It only starts working for you after they waive. If they waive under an escape notice and then cannot close, you are into the mutual release conversation with a deposit and a damages claim.

So the deposit still matters, just later. Ask for a real one. A buyer who will not put 5% down on a conditional deal is telling you how they expect the condition to go.

What I ask for before a client signs one

Their house listed, at a price I have checked against sold comps, before we sign rather than after. A hard outside date on the condition, 30 to 45 days, not 60 or 90. An escape window of 48 hours, with the right to keep showing and to hold an open house. A deposit sized for a firm deal. And a price that reflects the fact that you are lending them your listing for a month or two.

That last one is the part sellers skip. Every day under a conditional deal is a day your listing reads "sold conditionally" to buyers who move on. On the townhouse benchmark, the 5.1% annual decline works out to roughly $4,500 over 60 days. If the condition fails, you get the listing back with those days stapled to it, plus whatever September added to the inventory.

Why September matters

The Bank of Canada held at 2.25% yesterday, its seventh straight hold, and said financial conditions have tightened since July, with bond yields up. That reaches the buyer's buyer too. Whoever buys the buyer's house is working with a smaller approval than they had in spring. The next decision is October 28, too late to help a condition written this month.

The fall listing wave is arriving too. Last September new listings jumped 19% year over year and months of inventory went from 3.2 to 4.0 in four weeks. The fall market shows up as inventory, and the buyer's house has to sell into it.

None of this means refuse the offer. In a 3.5-month market a conditional buyer at full price may be the best buyer you see this month. It means take it on the terms above, keep the showings going, and read their listing every week as if it were yours. For the length of that condition, it is.

If a sale-of-property offer is sitting in front of you, send me the buyer's listing before you sign anything. Fifteen minutes and I will tell you whether their house sells in time. 613-262-6545 or fil@613realtor.ca. Or see what else is competing with it.