Subject to sale offers can be risky

Subject to sale offers can be risky

If you’re considering putting a ‘subject to sale’ offer on a property take the time to make yourself aware of the risks involved.

Subject to sale offers commonly occur when you find a home you want to buy before selling your current home.

While this isn’t an ideal circumstance, it is quite common.

What are the risks involved?

The state of the market you’re buying in has implications on the kinds of risks you face.

In a fast market, when you place an offer on a home before officially selling, you run the risk of the real estate market peaking before you’ve sold.

This peak could impact the length of time it takes to sell as well as your finances. You might even be forced to take out a bridging loan (which can be very expensive) to cover the entire purchase price of your new home.

If you are presenting a subject to sale offer in a slow market, there is a risk you might not achieve a satisfactory sale within a reasonable time frame. You could also find that when you do finally sell, the sale price is notably lower than anticipated. Miscalculating your finances can have significant ramifications on the cost of your end loan.

Before placing a subject to sale offer, make sure you have a good understanding of market trends.

Does the 48 hour clause affect subject to sale offers?

Sellers will often impose a 48 hour clause on a subject to sale offer. This means if another buyer makes an offer you must decide whether to make your original offer unconditional or withdraw it.

If presenting a subject to sale offer prepare your finances as if making an offer subject only to loan approval. This way you won’t need to scramble for alternative finances.

The benefits of selling before buying

Selling your current home before placing an offer on a new home puts you in the best position. You have greater control over your finances and will be in a strong bargaining position when making an offer.

This financial security is advantageous in a competitive market. Sellers tend to gravitate towards the least complicated option, so a buyer with a cash offer is more appealing than one with a subject to sale offer – even if the subject to sale offer is more lucrative than the unconditional offer.