Buying May 19, 2023

Subject to Sale 101

I have spent a lot of time helping a new buyer find a home.  To buy their new home, they must rely on the proceeds from the sale of their current home.  This is very common.  Most of us cannot purchase a new home without selling our current home.  The problem is that due to the state of a very competitive buyer’s market – many buyers are not using this contingency.  

To clarify the process of purchasing a new home subject to sale, here is a breakdown:

“Subject to sale” is a term commonly used in real estate that refers to a condition or contingency when buying a home. When a buyer submits an offer on a property and includes a “subject to sale” clause, it means that the purchase is dependent on the successful sale of their current home.

In practical terms, this condition allows the buyer to proceed with purchasing a new home while still needing to sell their existing one. It provides some flexibility and protects the buyer from being burdened with two mortgage payments if their current home doesn’t sell in time.

Here’s how it typically works:

  1. The buyer finds a home they want to purchase and includes a “subject to sale” clause in their offer. This clause specifies that the offer is contingent upon the buyer successfully selling their current home within a specified timeframe.
  2. The seller can either accept the offer with the “subject to sale” condition or reject it. They may also negotiate the terms or request additional information about the buyer’s current home sale.
  3. If the seller accepts the offer, they usually include a “kick-out” clause. This clause allows the seller to continue marketing the property and accept other offers. If another buyer submits a more attractive offer without a “subject to sale” condition, the original buyer will usually have a specific timeframe (often 48-72 hours) to either remove the condition or terminate the contract, allowing the seller to proceed with the new offer.
  4. Once the buyer’s current home sells within the agreed-upon timeframe, the “subject to sale” condition is removed, and the purchase contract becomes unconditional. The buyer can then proceed with the purchase of their new home.

It’s important to note that “subject to sale” offers can be less attractive to sellers compared to offers without this condition since it introduces uncertainty and potential delays. However, in a slower market or when the seller is not in a rush, they may be more open to considering such offers.

If you’re considering using a “subject to sale” condition, it’s crucial to work closely with a knowledgeable real estate agent who can guide you through the process and help you navigate any potential challenges that may arise.