Conditional Offers in a Seller’s Market
After the pandemic hit, Derek and Stephanie found themselves in a position like many other young families in Beaconsfield. Being forced to work from home, with three young kids running around, made them realize they needed more space.
Very few people looking to upsize can afford to buy a bigger home without having first sold their property. To do so you would need to be mortgage-free or approved to carry two mortgages.
Derek and Stephanie knew that in today’s hot Sellers’ market their property would likely sell in a matter of days or weeks. But with such a limited supply of homes on the market, they would also run the risk that their dream home wouldn’t be available after selling their current home and they didn’t want to settle for just anything. They asked the question we’ve been getting a lot lately:
"Could we make an offer conditional on the sale of our house?"
The answer is: it depends. In lower price ranges, where multiple offer bidding wars are common, a conditional offer would probably not fly. But in the higher price ranges, where there’s less competition, a Sale of Property Condition might work, if the offer is compelling enough to the seller.
How does the Sale of Property Condition Work?
A Buyer makes an offer to buy a home, conditional on them selling their existing property during an agreed upon period of time (usually 30-60 days). If they don’t sell their home during that period, the deal dies. If the Buyer sells their property during the time period, they waive the condition just like they would a financing or inspection condition, and the sale is firm.
The Escape Clause
An escape clause is an important part of the Sale of Property condition. It allows the Seller to continue to market the property and gives them the right to accept a second offer, with the original Buyer retaining the right of first refusal.
During the right of first refusal period (usually 72 hours), the Buyer has a choice: either remove the Sale of Property condition and show proof of financing (whether or not they have actually sold their home) or walk away from the agreement.
The second offer doesn’t need to be a higher price – it just needs to be accepted by the Seller and all conditions must be fulfilled for the escape clause to come into effect.
From a Buyer’s perspective, purchasing a home conditional on selling your own property is a great option. It secures the house you want, while reducing the risk of having to either rent or settle for something that doesn’t match what you’re looking for. If you are considering this option, you must realize that sellers will expect a premium for accepting this condition. You need to be willing to pay more for that luxury. But if it’s a home you really want, it can buy you a lot of peace of mind, which is worth a lot in this crazy market.
"We had decided to bite the bullet and put our house up for sale while continuing the search for a home that would suit our needs," said Derek. "We were almost ready to list when this home popped up that we absolutely fell in love with."
"We knew this house would probably be gone before we could sell ours," said Stephanie. "So we were advised by Megan and her team to go in with a very strong conditional offer, accompanied by a letter to the seller to let them know how much this home would mean to us."
Letter to the Seller - Heart Strings & Purse Strings
Below is an excerpt from the letter that Derek and Stephanie wrote that certainly helped to seal the deal. If you’re thinking of buying and selling, we’d be happy to talk through your options and help you decide which strategy is right for you.