Why ‘subject to sale’ offers are worth considering

Author: REIWA President Hayden Groves via reiwa.com.au

Buyers are often sellers too. Most people who decide to sell their home also look for an alternate property at the same time and it’s not uncommon for them to find something appealing before they have secured a buyer of their own.

What is a ‘subject to sale’ offer?

Buying a property “subject to the sale of another property” is common and REIWA agents are well equipped to ensure the sale agreement is procedurally correct.

Normally, these agreements enable the seller to continue to promote their property for sale and, in the event of receiving an alternate offer to purchase (normally not subject to the sale of that buyer’s property), give notice to the first buyer of their intention to proceed with the second offer after two business days.

This colloquially termed ‘48 hour clause’ provides the buyer two business days to obtain an offer on their property or waive the benefit of the subject to sale condition.

What does a ‘subject to sale’ offer entail?

Certainly, these arrangements can get tricky. Agents need to be especially careful not to prejudice the second party by giving the first buyer a hint that a second offer might be on the way. Notices served between the parties must also be technically compliant and strictly adhered to so as to not unfairly advantage either buyer.

A crucial point for sellers to be aware of is if they are accepting a ‘subject to sale’ offer, at say $600,000, this then binds them to that sale price within the 48 hour period – even if a second unconditional offer is higher (provided the original buyer can make their original offer unconditional within the 48 hour time frame).

’Subject to sale’ offers can benefit sellers

Although this type of sale requires more effort, contracts for sale that include the ‘subject to sale’ condition, often succeed and proceed smoothly to settlement.

This type of sale also has the potential to put the seller at an advantage, with the buyer often expecting to pay a premium for the privilege and protection of settling after the sale of their own property.

Given the conditional nature of the sale, sellers are justified in asking for a higher price from the subject to sale offer. There have been instances where the seller rejected a ‘subject to sale’ offer at a premium price, only to have that same buyer return to the same property after they’ve sold and pay a lower price.

I would advise sellers to consider all offers presented to them, including those that are subject to sale. In this market where competition is high between vendors, it’s in your best interest to give consideration to all serious buyers.