When it comes to finding a new home, should you make an offer subject to sale... or simply wait until your home is sold before you go out looking for a new one?

Your situation is unique and the safest way to make a decision is to be fully aware of the pros and cons of a subject to sale clause.

Pros:

  • An offer allows you to gauge the sellers expectation regarding sale price
  • Gives you first refusal and an opportunity to go unconditional should a 48 hour clause be invoked.

Cons:

  • A seller will consider an offer subject to sale as a “fall back offer”.  It is something that may or may not happen therefore you have no real negotiating power and the seller will expect you to pay top dollar.
  • You can be guaranteed (unless the salesperson is incompetent) that any offer you make subject to sale will also include a 48 hour clause (which means there is no guarantee you will secure the home even if your offer is accepted).
    The 48 hour clause is designed to protect a seller, it allows a seller to continue marketing their home in search of other potential buyers until such a time that you accept an offer for the sale of your home.
    If, prior to you selling your home, the seller accepts another offer for the sale of the subject property (offers must be cash or finance) then you will be given 48 hours notice in writing to make your offer unconditional (ie bridging finance) otherwise you will lose the property to the second offer.  Some agents use 48 hour clauses which exclude weekends & public holidays and some don’t so you would need to check the paperwork.
  • The 48 hour clause puts you under a pressure to sell your home quickly, would you accept a slightly lower offer for the sale of your home simply to secure the new dream home??
  • When you make an offer subject to sale it is impossible to know exactly how much money you have to spend?  How much is your home going to achieve?  Will it be more or less than you calculated?

Summary…financially I do not believe offers subject to sale are the best option.

My recommendation would always be to sell your home first and then go shopping, this makes more sense both financially and practically:

Pros:

  • Because your offer is no longer subject to sale…only settlement, you now have something solid to offer people therefore you have more negotiating  power.
  • You are not under pressure to sell quickly therefore you can wait until you receive the price, terms & conditions that suit you.
  • Having already sold your home you know exactly how much you have to spend on the new pad and are not gambling on what you will receive?
  • To ensure you are not homeless or put under pressure to buy the first home you see we would negotiate an extended settlement (with an on or before by mutual consent clause) or a rent back period on the sale of your home, this allows you the freedom and flexibility to shop at your leisure.
  • The on or before clause allows you the opportunity to bring settlement forward if you were to find a home much quicker than expected.

Cons:

  • If you are really fastidious and unable to find a new home within the negotiated extended settlement then you would need to find alternative accommodation. .ie rent, move in with family or friends etc.
At the end of the day, the final decision whether to shop before you sell is up to you... let us know your experiences in the comments below.