Condition on Sale of Buyer’s Property
This spring we saw a re-appearance of a condition on the sale of a buyer’s property in accepted offers. This is a direct result of lenders requiring a successful sale in order to secure financing on a purchase at most pricing levels. The risks and concerns are very different for a seller vs a buyer. Here’s what you need to know about the condition on sale.
As a seller, it’s important to understand the facts behind the property in question. As such, the condition, price and timing of market entry will all factor into the risk associated with the ‘saleability’ of that back-up home. In a slowing market it’s a much higher risk to accept a condition on sale of a $2 million-dollar home not yet on the market than it is for a $500k townhome in a hot market. It also begs the question of financial stability of your buyer… why do they require the condition in the first place? On the positive side, the inclusion of an escape clause will allow you to continue to offer your home for sale in the event another buyer is willing to make you an offer.
As a buyer, the motivation can vary as to why they feel it’s needed. For some, it’s a financial requirement and others it’s a safety net if they don’t reach their set goals or expectations on the sale of their home. It’s important to understand the ins and outs of what the condition will mean. You are asking the seller to take a chance on your home selling within a set period of time. As such, you should be in a position either already on the market or rather imminently. In that case, your Realtor needs to have an understanding of your home and value in order to properly convey to the other parties involved. We have also seen instances where offers have been ‘bumped’ by a firm offer and buyers not being able to meet their condition on sale requirements so, this cannot always be used as a buffer to get your home on the market.
Overall, proceed with caution when negotiating a condition on sale and protect your largest asset. We have seen the condition used unsuccessfully, but also to reach a very happy end for both the buyers and sellers as of late.