Need to sell your home to buy your next one? Chances are, yes you do! It may seem pretty simple but with assets this large and more than one party with their own self interests it can be a tricky endeavour. The key is in understanding the current market conditions and having your ducks in a row so you can mitigate the risks.

Here we guide you through the types of markets that will inform your approach, how “Subject to Sale” clauses work, and how to get ready to sell and buy real estate.

MARKET TYPES - The real estate market ebbs and flows in and out of sellers and buyers markets based on the simple law of supply and demand. When there are more buyers than homes for sale, or low inventory, we get a sellers market. When there are more homes for sale than there are buyers, or high inventory, we get a buyers market. And of course, when supply and demand are roughly the same we are in a balanced market, a nice level playing field for everyone.

There are ratios we use to determine mathematically what type of market we are in, if you’re super into math just ask we’re happy to provide!

SUBJECT TO SALE CLAUSE - A subject-to-sale transaction is when the sale of a property depends on the sale of another property. The buyer agrees to buy the property only if they sell their own property within a specified time frame. This type of transaction is common when a buyer wants to purchase a new property but needs to sell their current property first to finance the purchase. If the buyer can't sell their home within the agreed upon time frame, the offer and contract become void, making this a great safety net in terms of financing.  There are drawbacks to using this clause, make sure you read the 3rd and 4th bullet points in the "RISKS" section.

SO, WHAT IS A CLAUSE? - Clauses are nifty pieces of text that are added to an offer (which is a legally binding contract) and make the offer subject to the conditions a buyer or seller will complete a purchase or sale. A common one you might know is the clause "subject to inspection." You offer X amount for a house, but we add a clause that stipulates it is subject to an inspection. If that inspection reveals something you cannot live with, the "subject to..." clause provides an exit option for you.

• In a seller’s market: Chances are your home should sell relatively easily. BUT! The tricky part is where do you go once you sell?  With fewer homes on the market this could make finding a new home that ticks all your boxes difficult to find.  And if you’ve sold your home, you are now on a deadline to buy a new one.
  
  
• In a buyers market: You’re looking for a new home and there are lots to choose from, it’s a shoppers dream. BUT! Selling your own home may be tricky. There are many homes on the market, a lot have been sitting for a while and the competition for buyers is fierce.
  
  
• The Bump Clause: When using a Subject to Sale clause in your offer, the Seller is accepting it understanding there are no guarantees your property will actually sell. A prudent seller may add a “bump” clause to the buyers subject to sale condition, this allows the seller to force your hand if they receive another offer, generally giving you 72 hrs to remove all conditions. If you can’t, the seller will move on.
  
  
• Offer rejection:  A property may receive more than one offer and the seller has right to choose which one benefits them the most.  If they can choose between two with the same price and conditions but one has a subject to sale clause, chances are the one without will win the day.
   
• Interim housing: If you sell your home and have not yet found your new home or your closing dates are way off, you may have to stay with family and place your things in storage or rent a temporary place to stay. 

• Be ready to sell BEFORE you start shopping. If you are planning on using a subject to sale clause, you’ll be asking the seller to hold their home for you so try to put them at ease. You want to let them know that your home is ready to hit the MLS, the marketing team is on deck and you’ve priced it correctly. We’ve written an in-depth guide on preparing your home, you can READ THAT HERE. It's ok to window shop, but read on to #3 for another reason to be ready!
   
• Organize your crew. Make sure your financial team, your realtor, your notary or lawyer are ready, available and capable. Blow the horn and get everyone in line!
   
• Be ready to buy. When you find THE ONE, you're going to want to pull the trigger and things move fast, especially in a seller's market, and you could lose out to another buyer.
   
• Consider getting your home pre inspected if you don’t want to lose time with the chance a buyers inspection comes back not in your favour.  Potential buyers may require you to fix an issue or ask to renegotiate the purchase price, these things take time and you’re on the clock.
   
• Unless the stars align and all your closing dates match up, you may need financing to carry you through the interim.  With so many moving parts this is quite common, and bridge financing can be obtained with a firm agreement in place.
   
• If you sell first, talk to your realtor about the possibility of a rent-back agreement; a short-term leasing agreement allowing you to stay for a short period while you buy your new home. Of course, you'll need an amenable buyer for this one to work.

IN CONCLUSION.  Every property transaction is unique, and both buying first or selling first come with their own set of risks. Understand the ins and outs, get good advice, and listen to the Boy Scouts: Be Prepared.

Steve & Selena

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Selena: 236-258-6606

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