Humber/Ontario Real Estate Course 2 Exam Practice

If a buyer includes a condition in their offer that requires arranging mortgage financing, how should this condition be written to protect the buyer?

1. As a condition precedent with a binding contract.

2. As a condition precedent with a non-binding contract.

3. As a condition subsequent with a binding contract.

4. As a condition subsequent with a non-binding contract.

5. As an open-ended condition dependent on the seller's actions.

6. As a mutually waived condition dependent on future circumstances.

The correct answer is: As a condition subsequent with a binding contract.

When a buyer includes a condition in their offer that requires arranging mortgage financing, the condition should be written as a condition subsequent with a binding contract to protect the buyer. This means that the buyer's obligation to purchase the property is contingent upon them securing mortgage financing. By structuring the condition in this way, the buyer can walk away from the transaction if they are unable to secure the necessary financing without facing any penalties or consequences. Options A, B, D, E, and F are not the ideal ways to structure the condition for protecting the buyer in this scenario. A condition precedent with a binding contract would make the purchase contingent on securing financing before the contract becomes binding, which may not offer enough protection to the buyer. Similarly, a non-binding contract or an open-ended condition dependent on the seller's actions do not provide the buyer with the necessary safeguards in case they are unable to secure mortgage financing. Therefore, option C, writing the condition as a condition subsequent with a binding contract, is the most suitable choice to protect the buyer's interests when arranging mortgage financing.