Sale of Property Condition
Since the market has become more favourable for buyers, we are seeing the Sale of Property Condition which allows you to buy your perfect new home conditional on selling your present home.
Typically, homes are being sold today with conditions on the buyer obtaining financing and conducting a satisfactory home inspection. Rural properties may have additional conditions such as well-water testing and septic inspections.
The Sale of Property Condition works in much the same way. A buyer makes an offer to buy a home, conditional on them selling their existing property during XX period of time. If they don’t sell their home during that period, the contract expires and the buyer gets their deposit back. If the buyer successfully sells their property during the time period, they waive the condition just like they would a financing condition, and the home is considered legally sold and binding.
An escape clause is an important part of the Sale of Property Condition. It allows the seller to continue to market and show the property during the conditional period and gives them the right to accept a possible second offer, with the original buyer retaining the right of first refusal. During the right of first refusal period (usually 24-72 hours), the first buyer has a choice: either remove the SOP condition (whether or not they have actually sold their home)and commit 100% to the purchase or walk away from the agreement.
The second offer from buyer B doesn’t have to be a higher price or better in any other way – it just needs to be accepted by the seller for the escape clause to come into effect.
From the buyer’s perspective, buying a home conditional on selling your own home is a great option. It secures the house they want and reduces the risk of them not being able to close or being stuck with two mortgages if they are unable to sell their original property.
From the seller’s perspective, the SOP can be a way of solidifying a buyer when market conditions aren’t in your favour, and you don’t have any other good options to sell to.