Real Estate Talk:
Second-tier offer

There are several implications and specific reasons to use this condition

By Joseph Marovitch

April 3, 2025

Many situations arise when searching for and purchasing a residence. Each is dealt with under the conditions placed in the promise to purchase.

For example:

• An offer conditional upon selling the buyer’s last property first
• Multiple offer situation – several offers at the same time
• Conditional second-tier offer – placing a promise to purchase when there is already an accepted conditional offer from another buyer

These are examples of a few of the many situations that arise. There are basic conditions of examination of documents, inspection and financing with a mortgage or cash. These are the most common conditions.
However, there can be conditions of a phase one environmental test, mould inspection, vermiculite inspection, radon inspection, water well inspection, septic and fireplace inspection, and many more. These additional inspections and conditions arise from an initial home inspection or due to the location of the property, the age of the property, the proximity of the property to industrial sites, rivers, gas stations, railroad tracks, amusement parks and others.

Today, we are discussing the second-tier offer. A second-tier offer is a promise to purchase conditional upon a first promise to purchase, from another buyer, failing. This is the basic explanation, however, there are several implications and specific reasons to use this condition.

Multiple-tier offers are more prevalent in multi-residential income property purchases than in single residential home offers.

A listing broker and their client accept a conditional promise to purchase. The offer has conditions such as examination of documents, inspection and financing. The property is not sold until all conditions in the offer are satisfied. Therefore, the listing broker will continue to market the property and accept second, third and even fourth-tier offers. Note that multiple-tier offers are more prevalent in multi-residential income property purchases than in single residential home offers.

Situation

A buyer either finds a property they wish to purchase that already has an accepted offer, or enters into a situation where there were several interested parties who also submitted offers. This is known as a multiple offer situation. In the multiple offer situation, the seller accepted another offer instead, either due to a more favorable price and/or conditions.

Note that conditions have deadlines. The examination of documents could be six days, inspection fourteen days and financing, if a mortgage, fifteen to twenty days. The last date of the last condition would be stated in the listing on Centris. Therefore, an accepted second-tier offer would only come into effect on or before the last date of the last condition. If the first buyer decided at any point to cancel the offer, then the second-tier offer would come into effect sooner. If on the last date of the last condition, financing did not come through, then the second-tier offer would again come into effect, unless the seller gave an extension.

Our buyer is not pleased that they were outbid, however, they have options. Keeping in mind that other buyers who were rejected may still have interest and may also make second-tier offers. If our buyer wants to continue pursuing the property, they must make a second-tier offer.

‘The property is not sold until all conditions in the offer are satisfied. Therefore, the listing broker will continue to market the property and accept second, third and even fourth-tier offers.’

If the second-tier offer is accepted, this means our buyer will be the next buyer to proceed with the purchase process. If our buyer’s offer fails and there is an accepted third-tier offer, then that buyer is the next to proceed with the purchase process.

If there are several second, third or more accepted tier offers and our buyer did not make a second-tier offer, our buyer would have to wait until all the other offers failed, or not, in which case, game over.

In a second-tier offer, our buyer also must state deadlines, such as “This promise to purchase is conditional upon the first offer failing on or before the (date)”, meaning the date of the first buyer’s last condition.

Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.

Next article: Multiple offers in residential and income properties

State of the market

According to Robert McLister, a mortgage broker and contributor to the Globe and Mail and the Financial Post, in a recent post, stated that, in anticipation of the tariffs, which are to begin April 2, the Canadian inflation rate has already risen from 1.9% to 2.64% in March. In the U.S. inflation has already risen higher than the 2.64% of Canada. We can expect inflation to rise higher unless Trump stops this economic attack on Canada. To combat rising inflation, the tool the Bank of Canada uses is interest rates. Interest rates are raised to bring inflation down.

‘We can expect inflation to rise higher unless Trump stops this economic attack on Canada. To combat rising inflation, the tool the Bank of Canada uses is interest rates. Interest rates are raised to bring inflation down.’

For buyers financing a home purchase, choosing a fixed or variable rate has consequences and requires a discussion with a trusted, knowledgeable and experienced mortgage broker. There are pros and cons to variable and fixed. A fixed mortgage of 3 or 5 years is less risky than a variable mortgage. A variable mortgage may provide a low interest rate today, but it rises and falls with the inflation rate and the Bank of Canada rate. A buyer can be locked into a 5-year, 4.1% mortgage today or have a 3.8% variable mortgage today that can quickly rise tomorrow.

Regarding selling in this volatile market, a seller also requires a trusted, knowledgeable and experienced broker. Today’s real estate market is becoming more and more complex. Most buyers do not understand the intricacies of a real estate transaction in today’s market. With a tariff war causing increased inflation and mortgage rates, demand falters. Therefore, price and market campaigning must be strategic to provide incentives and motivation to attract buyers and still achieve optimal price and terms.

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