In this weeks video, Jamie explains Vancouver Real Estate Subject to Sale Offers for Home Buyers & Sellers.
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Below is a Video Transcription
Subject to sale
Today we are going to talk about subject to sale offers and the pros and cons of them. Something is becoming more commonplace in the market today as we are starting to see subject to sale offers with more regularity over the past 5 years. The reason being, in a hot market you won’t see any. People do not have the time to write a subject into an offer to get their home sold in time. When the market is busy, someone else who doesn’t need to sell their home will come in before you and scoop you on that property. Now when the market is starting to slow down, we are starting to see some sellers accept subject to sale offers.
Let’s talk about this from two points of view. We will talk about it from the seller’s point of view, and then go back and talk about it from the buyer’s point of view. From the seller’s point of view, accepting a subject to sale offer really doesn’t cause you any harm because you are going to protect yourself. Let’s say John Smith comes in and is going to write me an offer on my home, subject to him getting financing from the bank, subject to him doing a building inspection and the third subject being subject to him selling his home. Now let’s say that he wrote the offer on April 1st and he wants 30 days to sell his home by Apr 30th.
So me as the seller, I decide to accept his offer, but I am going to put a time clause in there of 24 hours. And what that means, is that I am going to keep showing my house to prospective buyers. If one of those buyers decides to write an offer on it, we are going to tell them that “We have an accepted offer with subject to sale on this property, with a 24-hour shotgun clause on the property”. So if Bill Jones decides to write me an offer and I accept this offer, we are going write into the offer that me (as the seller) is going to be released from a previous offer I accepted on April 1st, within 24 hours. Then my agent will go back to the other agent who wrote the first offer and say that we are invoking our 24 hr time clause. That means those buyers will need to remove their subjects within 24 hours or the property will be sold to the other buyers. That is how you protect yourself as a seller and how it is no real disadvantage. You have no idea of what you don’t control, such as the subject to sale buyers, what if they over-price their home and have no hope of selling it by April 30th. That is the importance of that time clause.
From the buyer’s point of view, I can only think of one advantage for a buyer to write a subject to sale offer. That would be that you are going to remove the subject regardless because you like the home. Some buyers like to think that, “Oh, I’ve bought a house”, but no, in my mind you have made a promise to someone to buy their house, but only if you get your house sold. I do not really see it as being an advantage to a buyer. As a buyers agent, I can go in and negotiate a lot better if we are talking money now, then if you manage to get your house sold in this extremely slow market. What happens if another home comes on the market before you get your house sold, that you like better than the other one you put the offer on? Over the last 5 years selling your house was easy, finding your new house was difficult. Now that has all changed. Selling your house is now difficult, and there are 2-3 times as many houses on the market as there was before.
My advice is to sell your house first, then go in with a pocket full of money and talk to the sellers when you have cash on the table and can make them a good offer now.