Conditional offer

A conditional offer refers to a kind of contract in which the seller is obligated to meet certain requirements before the buyer makes the purchase. The seller could, for example, be required to improve or repackage a certain product before the buyer takes it.

Conditional offers are fairly common in real estate. In the case of a house, the buyer may require that the original owner have it renovated and get the plumbing fixtures replaced before he makes the purchase.

However, it is usually not enough that the seller simply fulfills the demands set by the buyer. Such agreements are often time-bound. If the necessary changes are not made within a certain period of time, the agreement could be nullified. Since the buyer no longer has to make the purchase, any reservation or down payment fees issued must be returned to him by the seller.

Conditional offers may provide advantages to the buyer, the seller, or even both parties, depending on the kind of conditions set in the agreement.

For instance, the time period set within which the transaction should be closed plays an important role in how favorable the agreement could be. If the period set is too long, then it could pose problems for the seller who will not have income for as long as the buyer has not made the purchase. In such a situation, the seller could pressure the buyer into making the purchase by meeting his end of the deal while at the same time, still showing the property to other prospective buyers. To do this, an escape clause may have to be included in the agreement, in order to make sure that the seller can still sell the property if a better offer comes along.