Why a “Subject to Sale” Condition is least likely Your Best Option
What do you do when you find the perfect home, but you haven’t sold your current home? Most people consider putting an offer on their dream home, with a “subject to the sale of the buyer’s home” condition. However, this scenario is probably not your best option.
A “subject to sale” condition means that the buyer’s offer is conditional on them selling their own home – if they don’t sell their home by the deadline on the condition, the deal dies. If the seller is agreeable to a “subject to sale” condition, they will typically add a clause of their own, so if the sellers receive and accept another offer, the original buyers will have to remove all of their conditions within a certain period of time (typically 24-72 hours) or the new buyers get it.
So, what’s wrong with a “subject to sale” condition?
From the seller’s perspective, a pending offer – even if it is “only” a “subject to sale” offer – can deter other buyers from considering the home. While you don’t have to disclose the fact that you’re pending until a new buyer is interested, with the amount of inventory on the market right now, this can be enough to make a buyer look another way.
From the buyer’s perspective, this type of condition does not put you in a strong negotiating position. Think about it, you have to convince the sellers to accept an offer that is conditional on another home that they know very little about selling. This means your offer is going to have to be strong in every other way, especially price. They’re also going to want you to remove any other conditions (like financing and inspection) quickly, which means you could easily end up paying for an inspection, only to lose the home to another party. Now you also have to sell your existing home, and your motivation to sell just went waaaaay up. This could mean paying a premium for your new home, and selling for less than you could otherwise.
So why would anyone write or accept an offer with a “subject to sale” condition?
It all depends on market conditions, and the properties in question. Without going into every possible scenario, a seller may accept this type offer because they can negotiate hard on the other points. For one thing, an offer with a “subject to sale” condition is better than no offer at all in most cases. As long as the time clause you negotiate is relatively short, a “subject to sale” offer probably won’t scare away other buyers. With a good negotiator representing you in the right market conditions, a “subject to sale” offer can actually motivate other potential buyers to write better offers.
If you’ve truly find your dream home, and it’s unlikely you’ll find anything else you like, then a “subject to sale” condition may be your only option. You need to keep in mind that the house is really still on the market, as long as your offer is “subject to sale” and you could find yourself with 24 or 48 hours to remove your conditions – can you get financing for two homes in 48 hours? If you absolutely must have the home, and money is no object, then go ahead and put in an offer that is subject to the sale of your current home. But think about this… if it really is the perfect home, and you’d remove your condition if the seller’s get another offer anyway, why don’t you just write a strong offer in the first place, and try and get all the other things you want such as a possession date that works for you and a good price?
An even better scenario, is to get your existing home sold first and then make a strong offer without the risk of owning two homes. Keep in mind of course all this information is very general, not specific to any situation, and will change with the market.
