Understanding Subject to Sale Offers in Real Estate

What is a Subject to Sale Offer?

A subject to sale offer allows a buyer to purchase a property on the condition that they first sell their existing home. This prevents them from being financially overextended or left without a place to live.

Example of a Subject to Sale Offer

Consider a homeowner looking to upgrade to a larger home. They are concerned about selling first and not finding a new home in time. To mitigate this risk, they include a subject to sale clause in their offer, making their purchase conditional on selling their current home.

Pros and Cons

Pros

• Provides security, ensuring you don’t sell without securing a new home.

Cons

1. Higher Purchase Price & Lower Selling Price: Sellers may be less flexible on price, and buyers under pressure to sell may accept lower offers.

2. Bump Clause Risk: If another buyer submits an offer without this condition, you may have 24-72 hours to waive your conditions, potentially losing the home.

3. Financial Costs: Home inspections and appraisals are most likely non-refundable if the deal falls through.

Key Considerations

• Your home must be ready to list immediately after your offer is accepted, time is very much of the essence.

• Many sellers require a tight deadline for your sale.

• Have a backup plan (temporary housing rental, staying with family or friends) in case your home sells first.

A Better Approach?

Many buyers list their home first and wait for an accepted offer before making an offer on a new home. This strengthens their position, improves negotiations, and reduces financial risks.

Final Thoughts

Preparation is key to making the buying and selling process smooth. Understand the pros and cons, plan ahead, and consult  with us to make the best decision for your situation.

Looking for more details? Check out our podcast https://www.youtube.com/watch?v=vkm_oN2isTI&t=2s