Thursday 28 June 2018

The sale-of-property condition and how it works

When you're putting an offer together, you have to decide what conditions to include.  The usual ones people think of are mortgage/financing and a home inspection, and maybe insurance.  Rural properties typically also see conditions on a septic inspection and water-supply test.

One that might not come to mind right away is the sale-of-property condition, where the offer is conditional on the buyer selling their own property.  It's not an unusual condition, but its use varies by market.  In a strong sellers' market, it can be hard to convince Sellers to accept it because it means a longer conditional time and they often have other offers to choose from. But depending on your situation, you just might not be comfortable making an offer without it.

Here's the way the standard condition reads and how it works:

This Offer is conditional upon the sale of the Buyer's property known as <address>. Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than <deadline time> p.m. on <deadline date>, that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyer's sole option by notice in writing to the Seller as aforesaid within the time period stated herein.

So in simpler words, if you include this condition, you will have until the condition deadline to secure a firm sale of your property.  If you do NOT give notice to the Seller before the deadline that this has happened (and you don't agree to extend the condition), then the offer becomes dead and you are entitled to get your deposit back.

The standard wording includes the property address, so the Seller and their agent may well look up your listing if you're already on the market, and their personal assessment of the listing and price may impact their decision about your offer.  If you're not listed, then they're going to have some questions about when you're listing, at what price, and so on.

As for the deadline, although average time-on-market might be less, you never know how long it will take to sell your property.  This condition is usually 30 days but can be more or less.  As with any condition, if the deadline is approaching the Buyer and Seller can agree to extend it.  But this must be in writing and both parties must agree.

If you have a property you need to sell to close the next purchase, then making an offer without this condition can be a risk.  That is something to discuss with your real estate professional.  What you do will depend on time-frames involved, your market conditions, the demand for your current property's specific type and location, and so on.

Next week, we'll look at the ['Escape Clause'] that often accompanies the sale-of-property condition, which allows the Seller to continue to market the property.  Although this creates some pressure on the Buyer, it helps to make the condition palatable to the Seller.


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