Want to buy a house before selling your current one, but not sure how?
Maybe you’re ready to upgrade to a bigger, better home than you’re in now, but due to tight finances you need to sell your current house before you can afford to buy it.
The good news is, there is a way for you to buy a house before selling yours, called a subject to sale or ‘subject sale’ offer.
Subject to sale contracts do need more careful attention to detail, but they often succeed and proceed smoothly to settlement.
What is a subject to sale offer?
A subject to sale offer is a condition that allows you to put an offer in on a home you want to buy (either to upgrade, or downsize), and it will only proceed ‘subject to the sale’ of your current house.
When are subject to sale offers beneficial for buyers?
In most cases, if you sell your current home first and then look for a new home, odds are you will get the best possible price for both transactions. But depending on your circumstances, this may not be viable for you. Subject to sale offers can be very beneficial if you’re in one of the following situations:
- You’re thinking of upgrading or downsizing into a better home for your situation.
- You want to buy a house before selling, to avoid moving twice and the pressure of finding somewhere to live in the meantime.
- You’ve found a house but need to sell your home first, so you can use the funds to buy the new one.
In fact, over 73 per cent of our buyers and sellers are in this position – and the percentage is only getting larger with the tight lending conditions.
How are subject to sale offers beneficial to buyers?
- You won’t need to borrow anything, or as much money from the bank to afford your new mortgage (depending on the amount of equity available in your current home).
- You won’t need to move twice, if your current home sells before you have found a new home to buy and you need to rent in the short term.
- You won’t need to worry about paying for both a new mortgage PLUS your rent if you buy a new home before your short-term rental lease is up.
What are the risks of subject to sale offers for buyers?
- Your subject to sale offer may be beaten by more competitive buyers (with cash or finance offers).
- You may need to sell your home for a lower sale price.
- You might not sell your home within a reasonable time frame, and could potentially lose out on your dream home.
- You may need to pay a premium on your dream home. Sellers are justified in asking for a higher sale price from you, for the advantage and protection of settling after the guaranteed sale of your current house.
What’s the 48 hour clause?
This is usually combined in the ‘subject sale’ contract, and it means if someone else comes along with a cash or finance offer, you have 48 hours to go unconditional, and get either an offer on your house, or get home to home finance (previously known as bridging finance). Learn about home to home finance here.
If you can’t do this within 48 hours, then the cash or finance offer will take precedence over yours, and you will miss out on your dream home. Which is why it pays to be prepared…
How to give your subject sale offer the best chance of success…
Have your house ready to sell, that day.
You need to have your house ready, when you go looking for homes.
When you sign an offer and acceptance with a subject to sale clause on it, you’re saying your home will be going on the market that day, and will be selling for a certain price. A good real estate agent will already be thinking about buyers that they can get through your home to make the deal happen for you.
Stick with the agent that has your dream house listed for sale.
Get them to sell your home. They have a vested interest in making sure everything goes forward, but more importantly, they know what’s happening with the sale of your home, and can communicate it to the owners of the home you’re looking at buying.
Be very, very sensible about the price you list your home for.
Remember, it’s not about you creating a record in your suburb, it’s about you being able to get your home sold in the first place.
Sometimes that might mean forgoing 5 per cent or 6 per cent of the sale price - so you can move to your dream home. Which on a lot of occasions is going to be a bigger home, on a bigger block, with extra room for the kids, a bigger kitchen for the cook of the family, or a workshop.
Focus on the reasons why you’re moving, and you’ll have a better chance of pricing your home for sale correctly, and allowing your subject to sale offer to proceed.