Buying Tips #5 Subject to Sale Clause

Another ‘subject to’ clause that buyers may need to occasionally consider is the ‘subject to sale’ clause. It’s not overly common but what it means is that you’ll buy someone’s house on the condition that you sell yours.

It’s important that both sides think carefully about this. Both the seller and the buyer need to consider the implications associated with a ‘subject to sale’ clause.

These clauses tend to be risky and could be classified as an any-port-in-a-storm scenario. If the vendor’s home has been on the market for quite a long time, they may take the view that they have nothing to lose by taking you on with a ‘subject to sale clause for your house. However most vendors and agents wouldn’t recommend that anyone enter into a ‘subject to sale’ clause.

Here’s why. When a property is taken off the market, subject to the sale of your place, most vendors won’t actually stop all further inspections while they wait for you to sell yours. How long are they going to give you? 30 days? 60 days? What if that time period is written into all relevant contracts?

Imagine a 60 day clause as an example. On Day 59, you haven’t sold your place yet. You phone the estate agent and tell them you have to rescind the contract and can’t purchase their home.

There are no winners. The vendor has lost two months (or however long it was that they agreed upon) and you’ve lost all that time as well. In this situation, you’d be far better off to go ahead and buy the house you love, but on an unusually long settlement period. It might be six months (just an example) but there are no rules. It is preferable to propose a settlement period of six months, or earlier by agreement, rather than the ‘subject to sale’ clause.

However, remember that if you choose this option (six months to settle) you are going to have two homes – and two mortgages to pay – if your place doesn’t sell. So think long and hard and take some advice from your agent and/or solicitor about the pros and cons of a ‘subject to sale’ clause because at Jens Veal we think there are more cons than pros.

With this food for thought, we’ll leave you until the next video!