Buyers & Sellers Guide: Purchasing a Home Subject to Sale
Today's buyer is tomorrow's seller. Subject-to-sale transactions work best when both parties understand each other's position — because chances are, you'll soon be standing in theirs.
Presented by Value-First Home Team
What Does "Subject to Sale" Mean?
Conditional Offer
This typically means a buyer's offer depends on successfully selling their current home before the new purchase can be finalized.
Financial Protection
This can often help protect the buyer from carrying two mortgages simultaneously, which can be a valuable safeguard in uncertain markets.
Timing Challenge
This situation often arises when coordinating the simultaneous sale and purchase of homes, which can prove logistically complex.
The Time Clause: How Subject to Sale Offers Work
When a buyer makes a "subject to sale" offer, they propose to purchase a property conditional on successfully selling their own home. If the seller accepts this conditional offer, a "time clause" is often included, meaning both parties wait for the buyer's home to sell.
The Time Clause Mechanism
Under this clause, the seller continues marketing their property. If a "kick-out offer" is received, the seller notifies the original buyer, who typically has 48 hours to decide. The buyer can either remove their subject to sale condition to make the offer unconditional, or withdraw from the deal penalty-free. This mechanism protects both the seller from being tied indefinitely and the buyer with an escape route.
Possible Outcomes
If the original buyer removes the condition, the deal becomes firm. If the buyer withdraws, the seller is free to accept the new offer. Should the original buyer's home sell before a new offer, the condition is automatically removed, and the deal proceeds as a firm transaction.
For Buyers
Pros for Buyers
Reduced Financial Risk
This approach can help alleviate the burden of double mortgage payments, potentially preserving your financial stability throughout the transition.
More Time to Sell
It often offers valuable breathing room, allowing you to sell your current home at a fair price rather than feeling pressured to accept a rushed or discounted offer.
Less Stressful Move
You may find this contributes to reducing the pressure of needing interim housing, meeting rushed timelines, or managing costly short-term rental arrangements.
For Buyers
Cons for Buyers
1
Less Competitive Offers
Conditional offers can be less appealing to sellers compared to unconditional ones, as certainty is often preferred.
2
Potential for Losing the Property
Should a seller receive a stronger offer, they typically have the option to invoke a time clause, which could require a swift decision on your part.
3
Consideration for a Higher Price
To offset the added uncertainty for the seller, you might find that offering a premium price or more favorable terms can be beneficial.
4
Upfront Costs Without Guarantee
It's common for sellers to expect other conditions (like inspection, financing, or appraisal) to be waived, meaning you may incur due diligence costs before your current home sells, without a definite guarantee the deal will proceed if your sale doesn't close.
For Sellers
Pros for Sellers
Wider Buyer Pool
Considering conditional offers can broaden your property's appeal to buyers who haven't yet sold their current homes, potentially expanding your market reach.
Renewed Interest
This approach can be especially valuable for properties that have been on the market for a while, as a subject-to-sale offer often helps maintain momentum and interest.
Time Clause Protection
With a time clause, you typically retain the flexibility to continue marketing your property and may accept a stronger, unconditional offer, which can keep your options open.
For Sellers
Cons for Sellers
Potential for Extended Uncertainty
The sale can remain conditional until the buyer's property sells, which may lead to delays and less predictable timelines.
Reduced Market Exposure
The property might appear "under offer," which can sometimes cause other interested buyers to look elsewhere during the waiting period. It's worth considering how this might affect attracting additional serious offers.
Negotiation Challenges
If the buyer encounters difficulties in selling their property, there's a possibility they may seek to renegotiate the price. This can add pressure during a period where you might prefer more certainty.
Making Your Offer Attractive with a Subject to Sale Clause
Because you're asking the seller to accept added risk, your offer could benefit from compensating with competitive terms that are hard to refuse.
Price & Terms
Consider offering at or above market value with favorable settlement terms to offset the seller's uncertainty.
Realistic Timeline
Setting a credible, firm deadline for your home sale can often help; vague timelines typically erode seller confidence immediately.
Time Clause Consent
It's worth proactively agreeing to a time clause, which can allow the seller to continue marketing and accept competing backup offers.
Quick Release Ready
Being prepared to remove the condition swiftly if the seller receives another offer can be beneficial — you may want to have your finances ready to act fast.
For Buyers
Market Risk: Buyers in a Declining Market
Your Home May Lose Value Faster
While waiting to sell, your property may depreciate, reducing your equity and buying power for the new home.
Longer Sale Times
Declining markets typically mean fewer buyers and longer days on market, making your sale deadline more challenging to meet.
Price Adjustments May Be Necessary
To attract buyers, you might find it necessary to adjust your asking price significantly, which could influence your purchasing budget for a new home.
Seller Impatience May Grow
As the market softens, sellers often become more anxious and less willing to wait for conditional offers to resolve.
Financing Can Be Complicated
Banks may revalue your current home downward, affecting your equity position and loan approval for the new property.
For Sellers
Market Risk: Sellers in a Declining Market
Deal Falls Through, Value Drops
If the buyer's sale fails and they withdraw, your home may have lost significant value during the waiting period, which can lead to considering a lower price.
Wasted Time in Falling Market
Every week spent waiting for the buyer's conditional sale to resolve can be a period where your property's value may continue to decline.
Fewer Backup Buyers
In a declining market, there are typically fewer qualified buyers available, which can make it more challenging to find an alternative if the conditional offer collapses.
Pressure to Accept Lower Offers
If the deal falls apart, you may find that considering a lower offer than the original conditional one could be a practical approach to secure a sale.
Carrying Costs Accumulate
Mortgage payments, property taxes, insurance, and maintenance costs can accumulate while your asset may depreciate and remain unsold.
For Buyers
Buyer's Checklist for Subject to Sale Offers
Understanding what sellers evaluate can help you craft a stronger conditional offer that stands out from the competition.
The more certainty you can provide to the seller, the less you may need to compensate them on price. Conversely, the more conditions and flexibility you're asking for, the more generous your offer typically needs to be. Understanding this trade-off helps you craft an offer that balances your needs with the seller's expectations.
01
Price Your Current Home Competitively
Consider getting a professional appraisal and aiming to price it to sell quickly, rather than aspirationally.
02
Set a Realistic Sale Deadline
Allow for sufficient time, but presenting a firm timeline can demonstrate your commitment to the seller.
03
Consider Your Offer Price
To help compensate the seller for the inherent risk, offering a premium price or favorable terms can often be beneficial.
04
Agree to a Time Clause
Showing flexibility by allowing the seller to continue marketing the property and accept backup offers can make your proposal more appealing.
05
Provide Proof of Marketing
Providing your listing details, agent credentials, and any early buyer interest can help build the seller's confidence.
06
Pre-Approve Your Financing
This helps demonstrate that you are ready to close immediately once your current home sells.
07
Communicate Proactively
Committing to regular updates on your sale's progress can keep the seller informed and reassured throughout the process.
08
Consult Your Agent & Lawyer
Seeking professional advice on the terms, time clause wording, and exit strategies is often recommended before submitting your offer.
For Sellers
Seller's Checklist for Subject to Sale Offers
Knowing what buyers need to demonstrate helps you evaluate conditional offers and protect your interests.
The more flexible you are with a buyer's conditions, the more risk you're accepting — and that typically means you can expect a higher price or more favorable terms to compensate. Understanding this trade-off helps you evaluate whether a conditional offer is worth considering.
01
Considering if the Buyer's Home is Listed
Confirming their property is actively marketed with a reputable agent at a competitive price can be a good step.
02
Reviewing the Buyer's Sale Timeline
It's often helpful to assess whether their deadline is realistic based on current market conditions.
03
Evaluating the Offer Premium
You may want to determine if the price and terms adequately compensate you for the added risk and uncertainty.
04
Considering a Time Clause
Including a time clause can help protect your ability to keep marketing and accept superior unconditional offers if they arise.
05
Requesting Regular Updates
Establishing a communication schedule for progress reports on the buyer's sale is typically beneficial.
06
Assessing Buyer's Motivation
It can be insightful to look for signs they're serious—such as pre-approval, active showings, or price reductions if needed.
07
Considering Market Conditions
In hot markets, conditional offers typically carry more risk; in slower markets, they may be your best option.
08
Consulting Your Agent & Lawyer
Seeking professional advice on the terms, time clause wording, and exit strategies is often recommended before accepting.
Key Takeaway
Subject to sale offers are a smart tool for both buyers and sellers — but they involve a trade-off. Buyers: the more certainty you provide, the more competitive you can be on price. Sellers: the more flexibility you offer, the higher the compensation you can typically expect.
Understand the Trade-Off
Buyers: offer competitive terms to offset the condition. Sellers: expect higher prices when accepting more risk.
Communicate Transparently
Both parties benefit from clear timelines, proactive updates, and honest dialogue throughout the process.
Work with Professionals
Whether buying or selling, your Realtor, mortgage advisor, and legal counsel can help you navigate the complexities with confidence.