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“SUBJECT TO SALE” SURVIVAL GUIDE

The process of selling and buying a home simultaneously can be delicate. Below I will outline the process of dealing with a “Subject to Sale” and the different components that it entails as both a seller and a buyer.

 

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What is a “subject to sale”?

Whether you’re a buyer making an offer or a seller receiving one, the principles of a Subject to Sale are the same.

The Buyers must sell their home before they can remove subjects on the offer on the home they are buying.

There is always a timeline established and often they are accompanied by something called a “Time Clause", which I will explain below. If the Buyers do not sell their home or arrange alternative financing before the specified date, the deal falls apart.


time clause - the clock is ticking!

Often Subject to Sale offers are accompanied with a Time Clause. The purpose of a Time Clause is to give the Sellers some power in deciding the timeline of the current Accepted Offer. It gives them the ability to either expedite the current pending deal and force the Buyers to remove their subjects or the deal terminates. This allows the Sellers to accept a new offer, should one come in.

Time Clause Sample Timeline:

  • Accepted offer - with 48 hr Time Clause (This time period is often either 24, 48 or 72hrs)

    • Buyers begin Due Diligence and work toward removing other Subjects (i.e. Home inspection, Strata Bylaws, etc)

    • Within the Time Clause the Buyers have given a date at which they will sell their home or terminate the offer. They now work toward selling their home prior to that date.

    • The buyers successfully achieve an accepted offer on their home and then move through due diligence to an unconditional offer, at this point they can then now remove all subjects on the offer on your home. OR…

  • A NEW offer is submitted on the property, which the Sellers would prefer to accept

    • The Seller’s can invoke the Time Clause, giving the Buyers 48 hours (or whatever the specified timeline is) to remove their subjects. If they do not, the current deal falls apart and the Sellers can now move forward with the NEW offer at their discretion.

If the Buyers successfully obtain an accepted offer on the home they are selling. The Buyer's agent will often work with the Seller’s agent to remove the Time Clause in place of a standard subject to sale.

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Subject to Sale without a time clause

So you’ve written or received a non-Time Clause Subject to Sale offer. This means that the Buyers have until the specified Subject Removal date to sell their home or else to deal falls apart, just as it would if any other condition was not fulfilled. The Sellers have no way to expedite this process after acceptance.

This is still low risk for both parties and it provides the structure for a more stable and predictable sale. It does however, leave the Seller with the potential to miss out on better offers during this Subject Removal period.


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Back up offers

The name may seem self explanatory but hey, let’s go over the details.

If a home currently has an accepted offer that is in the Due Diligence stage, another Buyer may submit a Back Up Offer, should the Seller decide to consider it.

In the scenario where the Sellers accept this Back Up Offer, this offer is now “next in line” if the current Accepted Offer falls apart.

A Back Up Offer can be submitted on any property with an Accepted Offer, including Subject to Sale Offers, but some Sellers may choose to not consider it.


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Seller’s Subjects

You may be considering selling your home to purchase another, maybe you’re considering making a Subject to Sale Offer on a home.

But, you don’t want to end up homeless if you sell before you buy or be forced to sell your home before you find the right place. That’s a scary thought!

Don’t worry. You can protect yourself from this situation!

You can insist on a "Seller’s Subject” in any offers you receive on your home. This subject would be written to protect you from Subject Removal before you find the right place. Meaning, you don’t have to sell your home until you’ve secured the place you’re moving to.

The Subject would read something similar to:
Subject to the Seller entering into an unconditional agreement on or before ____ to purchase another residence. This condition is for the sole benefit of the Seller.

This ensures that you are protected from moving forward with selling your home until you’ve removed Subjects on another home.