If you're looking for real estate you have likely contacted a listing realtor and heard that a property on MLS or Realtor.Ca is "Conditionally Sold" or is now "Sold Firm" Also, some conditionally sold properties may have an 'escape clause' as part of the conditions.
When an offer is made on a property, there are often 'conditions' attached to the offer. Conditions can be virtually anything, but are commonly home inspection, financing confirmation, review by a lawyer, or sale of purchaser's property (SOPP).
If an offer is accepted by the Seller, the Buyer gives the promised deposit and then has a short time ( 5-10 business days usually) to have a home inspection, confirm financing, etc. to decide if they will proceed or not with the purchase-- when all of the conditions are fulfilled or waived, the deal 'goes firm', meaning that there is nothing left for the Buyer to do and no remaining option to get out of the contract and still keep the deposit. If the Buyer decides they do NOT wish to proceed, they will get their deposit back, and the property will likely go back on the market.
The question I often get is: Can another Buyer make an offer to buy the same property if the deal is conditional, and not sold firm yet? The answer is usually no, but sometimes there is an ESCAPE CLAUSE allowing another offer to be accepted during the conditional period. The whole point of the conditional period is to give the Buyer a chance to make an informed purchase, confirm financing, inspect the property so that they will follow through on the contract to purchase on the closing day 30,60,90 days. With no escape clause, the Buyer can fulfill the conditions, and make the deal "FIRM" at any time within that period.
How does the ESCAPE CLAUSE work? An escape clause is written into the offer (Agreement of Purchase and Sale) for the benefit of the Seller, usually because the Buyer is requesting 15 or more days on one or more conditions. Often the escape clause is there because the Buyer still needs to sell another property in order to purchase the Seller's property.
If there is an escape clause, another potential Buyer can offer to purchase, and if the Seller wishes to accept the new offer they HAVE TO GIVE THE ORIGINAL BUYER a chance to waive or fulfill their original conditions - usually in a short period of time (24, 48, 72 hrs) -- at this point the original Buyer can do so and the first offer will go 'firm' keeping the new Buyer out. If the original Buyer can NOT reasonably firm up their deal, the Seller can move forward with the 2nd Buyer, effectively bumping the firm Buyer out of the deal. The Seller has "ESCAPED" from the 1st offer to accept the 2nd offer.
Note: The original Buyer always has an option to keep the deal going, but may have to put themselves in a financially risky position to do so. Many people end up having to pay for 2 mortgages for a time while selling their original home.
