Humber/Ontario Real Estate Course 3 Exam Practice

What happens to an accepted offer with a condition subsequent allowing the buyer to arrange financing?

1. The agreement is non-binding until financing is arranged

2. The agreement becomes void if financing isn’t arranged immediately

3. The agreement is binding but can be terminated within a stipulated period

4. The condition must be fulfilled within 24 hours

5. The financing approval can be waived by the seller

6. The buyer must arrange separate agreements for financing

The correct answer is: The agreement is binding but can be terminated within a stipulated period

In the context of real estate transactions, a condition subsequent is a type of clause in an agreement that allows one party to fulfill specific requirements after the agreement has been accepted. When an accepted offer includes a condition that allows the buyer to arrange financing, the buyer is often given a certain period to meet that condition. The reason this answer is correct is that the agreement remains binding despite the existence of the financing condition. This means that both parties are obligated under the terms of the agreement, but the buyer has the right to terminate the agreement if they are unable to arrange financing within the specified timeframe. This creates a balanced situation where the seller can be assured of the buyer’s commitment, while the buyer retains the option to back out if they cannot secure financing, thus protecting their interests and financial capabilities. The implication of this arrangement is that while the offer stands, the actual completion of the sale is contingent upon the buyer meeting the financing condition. This framework encourages buyers to take necessary steps to secure their financial backing promptly, leading to either a successful transaction or a lawful exit if that financing does not materialize. While the other choices imply varying levels of flexibility or conditionality that don't accurately reflect the legal reality of such real estate agreements, the acknowledgment of a defined