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What is a Subject to Sale

Subject to Sale

With only a small handful of buyers having the means to purchase a new property without either funding the transaction through a home loan or by selling an existing property, sellers have come to expect that there will be some suspensive conditions attached to the Offer to Purchase that they receive.

‘Subject to Sale’, is one of these suspensive conditions; it means that the buyer makes the offer on the property that he or she wishes to acquire, subject to him or her being able to first dispose of an existing property. A deadline of 60 days, from date of offer, is normally attached to the condition to afford the seller a measure of protection.

Nowadays, a further clause is added, which allows the seller to continue marketing the property even after accepting an Offer to Purchase. This clause is commonly referred to as a 72 hour clause. Should the seller receive an offer, prior to the ‘Subject to Sale’ suspensive condition in the Offer to Purchase being met, he or she can invoke the 72 hour clause. In practice, the buyer will then have 72 hours from time of written notification, to finalise the sale of his or her property.

Using a ‘Subject to Sale’ suspensive clause in an Offer to Purchase could be frustrating for both parties to the transaction.

If you are the seller it could mean that you will have to wait longer for the transaction to finalise and for transfer to take place. Fortunately, if you include the 72 hour clause, you will be allowed to continue looking for new offers while the buyer is busy fulfilling the suspensive conditions on the Offer to Purchase.

Although there are more properties than buyers on the market at present, it is good to keep your options open. For instance, if you are under pressure to sell for whatever reason, you may just be fortunate enough to find a buyer who is in a position to make an unconditional offer, or if you are lucky enough to have time on your side, a buyer who is prepared to pay more. You never know.

If you are the buyer, you are decidedly worse off than the seller in this instance. The bottom line here is that you will need to secure a firm Offer to Purchase, sans a ‘Subject to Sale’ clause, in a hurry. If you don’t, you may be faced with either the 72 hour clause being invoked or the cancellation of the offer you have made on the new property. In effect, your efforts to find the right property at the right price would have culminated into absolutely nothing at all.

Should you be one of the many buyers who need to sell their own properties in order to afford new ones, you would do well to first get the sale of your existing property over and done with before starting your hunt for a new house in earnest. There are two reasons for this:

1. The property market is very slow at present. It takes quite a bit longer to sell properties right now than was the case two years ago - in fact, it is commonly accepted that the sale of a house takes around four months on average nowadays. This implication of this is that the ‘sixty days from offer’ deadline contained in a standard ‘Subject to Sale’ clause, is hardly likely to afford you sufficient time to sell your existing home – more so if the sale of your house is subject to certain suspensive conditions, in return.

2· If you find yourself under pressure to sell you may end up accepting a lower price than you should. By first selling your house and only then buying a new one, you will have the ability to hold out for the right price.

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