The last strategy I like to discuss here is the buyer's conditional offer, which is conditional on selling the buyers' existing house. Let's look into this in more detail.
What is the Sale of Property Condition Clause (also referred to as "House Sale Contingency Clause")? The Sale Of Property Condition (SOP) is placed in the buyer's offer, and it states that the buyer will purchase your house if the buyer can sell his house first. This condition is to protect the buyer from ending up with two properties. In the sales agreement, the condition protects the buyers since if the buyers can not sell their home, the buyers will walk away from the agreement without any financial and legal consequences.
A conditional clause (also referred to as contingency clause) is a provision included in a contract requiring specific action to validate the agreement. If the buyer cannot meet this requirement, the agreement is void, and the buyer can walk away from the deal.
A conditional offer is an offer that includes a conditional clause - NOT accepted by the seller yet.
A conditional agreement of purchase and sale is an offer with a conditional clause that is ACCEPTED by the seller. Once the conditions are waived or fulfilled, you have a firm and binding agreement.
A legally firm and biding agreement implies both seller and buyer are obligated to complete the transaction.
Market dependent strategy. A critical point to consider is the marketplace; for example, the Toronto market strategy is quite different from smaller towns in Ontario. The Sale of Property Condition (SOP) can be a strategy and tool for smaller cities in Ontario, where there is less demand for the properties. If the seller has been waiting for an offer for a while, that seller will be glad to get an offer even conditional upon the buyers' home sale. Any offer is better than no offer. I believe the SOP condition can benefit sellers and buyers in a market where sellers do not anticipate to get many buyers.
In the communities and cities like Willowdale, Toronto, where demand for houses is strong, the SOP clause does NOT work. If the sellers have confidence they can sell their house, why would they accept an offer with the SOP condition? There is no reason for the seller to wait until the buyer sells his house first. In conclusion, different markets demand different strategies. In a seller's market or strong markets, the Sale of Property conditional offer is rare since it does not help the transaction go through. In the smaller communities, where buyers are hard to come by, conditional offers with SOP may help the buyers and sellers, ultimately help get transactions to go through.
As a buyer, what should I know about the sale of property condition?
A sale of property condition reduces the buyer's financial risk since you'll commit to purchasing your next house only if you manage to sell your existing one. The buyer will also benefit from the convenience of moving from their existing home to their next home without interruption.
The sale of property condition protects the buyer and provides benefits; however, there are also drawbacks for the buyer. The seller will expect more money since there is the risk that the seller ends up not closing the deal after a long wait. Because of the conditional offer, the buyer is at a disadvantage when it comes to price negotiations. As any professional real estate agent will tell you, there are some initial home-buying costs the buyer must consider as well; for example, the cost of the home inspection, appraisal, bank fees. The buyer should be aware that such expenses are not refunded if the deal falls.
As a seller, what should I know about the sale of property condition?
The sale of property condition is included in the offer for the benefit of the buyers. So the buyers can sell their existing property while they have the next property locked in. The buyers' real estate agents will advise against using the sale of property condition in an active market like Toronto since the sellers likely reject the offer. You'll also discover that listing agents will strongly oppose the sale of property condition. The take-home message is the use of the sale of property condition is market depended. Hence it is commonly used in smaller communities where sellers do not anticipate other buyers.
Here are essential points to recognize if you are considering to accept the sale of property conditional offer as a seller. Your trusted real estate job is to work for your benefits. You should have a detailed conversation with your listing agent to guide you with the process.
An experienced real estate agent will investigate the buyer's property before accepting the conditional offer. Here are a few questions to consider. If the buyer's existing house is on the market, and how long has it been on the market? Is the house listed at the market price? What is the average selling period in the neighbourhood? Is the house in a selling condition? Who are the listing agents for the buyer and their track record?
These are some of the red flags; the house is not for sale or has been on the market for over 30 days, the house is not in a selling condition, the listings agents are not experienced.
In summary, selling your home and buying at the same time may seem a daunting task, but it should not be. Your trusted real estate agent is there to help you to make the best decision. The strategy depends on the market - the demand and supply in the community. In my experience, if selling your home is well-planned, things will go smoothly most of the time.
The above Real Estate article was provided by David Khosravi, a leader in his field in Willowdale, North York, Toronto. Reach out to David via email: firstname.lastname@example.org or by phone: 416.990.2424