Buying A Property Subject To The Sale Of Your Own
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If you are in the market for a new home but have yet to sell your existing property, you may be wondering if it is possible and how to go about such a transaction.
Many home buyers choose to put in an offer on a property before selling their home. There are lots of reasons why someone would choose to buy before they sell, including locking in interest rates, seeing their dream home come up for sale, needing more space due to a growing family, or moving for a new job.
If you have to buy before you sell, there are some ways of manoeuvring the transaction to work in your favour. Here’s what you need to know about buying a property subject to the sale of your own.
What are the pros and cons of buying subject to sale?
Buying a property before you sell means you can plan for the move and if all lines up, avoid having to move twice or rent elsewhere before you move into your new purchase. This is a huge pro as it saves time, money and energy ordinarily spent moving.
Aside from the pressure of having to sell your property before you settle on your purchase, the biggest con to buying subject to the sale of your property is that you may not seem like the ideal buyer when the vendor is comparing your offer with those who can settle without conditions.
If you must buy before you sell, there are a few ways to look more appealing to a seller. If you can afford to, make a generous offer that sets you apart from a buyer who is offering less but does not need to use a ‘subject to completion of sale’ clause.
If you cannot afford to blow others’ offers out of the water, you may need to offer more security to the seller by specifying in the contract certain dates by which you must have sold and settled on your property. It can be written into the contract that if you do not sell your home by the specified date either party may terminate the contract, which will reassure the seller you are serious about trying to sell your home to fund the purchase of their property.
Subject to completion of sale clause
The inclusion of a ‘subject to completion of sale’ condition is essential for homeowners who want to buy before they sell. This clause indicates that the vendor has agreed not to settle on the property unless or until the buyer’s property sells.
As a buyer, a ‘subject to completion of sale’ clause affords an added protection that means funds for the new property will not be required until the buyer’s existing property is sold, and the proceeds of that sale can be put towards the new purchase.
Seek a long settlement
If you need another alternative to buying subject to sale or renting between the time you sell and buy, you could request a long settlement period from the vendor of your new property and match the settlement date with your sale.
A settlement period of three or four months is usually enough time to ensure a simultaneous settlement, but if the dates do not match up perfectly, your solicitor or conveyancer may be able to negotiate the date on your behalf.
What are your options if you cannot sell your home after agreeing to buy another property?
If your property has not sold in time to raise the funds for settlement on your purchase, you may be required to take out a bridging loan. A bridging loan is a short-term loan provided by a lender contingent upon the fact the funds required for the purchase of your new property will be available shortly because settlement on your sale is imminent. This option works well if you are not able to seek a long settlement or you have not been able to achieve a simultaneous settlement. Bridging loans are typically interest-only and they usually attract a much higher interest rate than regular home loans.