Yes. A buyer in Queensland can make an offer to purchase a property subject to the sale of their existing home.
This type of arrangement can be useful when you have found your next property but need to sell your current home to provide some or all of the funds required for the new purchase.
However, a purchase is not automatically protected simply because you intend to sell another property. The appropriate condition needs to be included in the contract, and its wording will determine how the arrangement operates.
If your purchase depends on selling another property, it is important to obtain legal advice about the proposed contract before signing.
What Does Buying “Subject to Sale” Mean?
A subject to sale arrangement generally involves a special condition making the purchase conditional upon the buyer achieving an agreed outcome with their existing property. The exact condition will depend on the circumstances.
For example, a buyer whose property is not yet under contract may require a condition allowing time to enter into a contract to sell their existing property. The condition may also specify whether that sale needs to become unconditional.
If the buyer’s existing property is already under contract, a different condition may be appropriate, such as making the new purchase conditional upon the successful settlement of the existing sale. These are different situations, which is why the wording of the special condition needs to reflect the buyer’s circumstances.
Why Buy Subject to the Sale of Your Existing Home?
Many homeowners rely on the proceeds from the sale of their current property to fund the purchase of their next home. Without an appropriate condition, a buyer who signs a contract to purchase another property may still be required to complete that purchase even if their existing property has not sold.
Depending on their financial circumstances, this could leave them needing alternative finance or facing difficulty completing the new purchase. A properly drafted special condition can address this risk by specifying the circumstances in which the purchase depends upon the buyer’s existing property being sold.
What Should a Subject to Sale Condition Cover?
There isn’t one subject to sale clause that is suitable for every property transaction. Depending on the circumstances, the special condition may address matters such as:
- which property the buyer needs to sell;
- the date by which the required sale must occur;
- whether entering into a contract is sufficient or whether that contract must become unconditional;
- whether the existing property must actually settle;
- what steps the buyer is required to take to satisfy the condition;
- what notices must be given between the parties; and
- what rights the parties have if the condition is not satisfied by the required date.
The precise effect of any condition depends on its wording. Buyers should therefore avoid assuming that all contracts described as “subject to sale” provide the same protection.
What if Your Existing Property Is Already Under Contract?
If your existing property is already under contract, the issue may no longer be whether you can find a buyer. Instead, you may need your existing sale to successfully proceed to settlement so the sale proceeds are available for your new purchase.
That distinction is important. Having a signed contract for your existing property does not necessarily mean that sale is guaranteed to settle. The contract may still be subject to conditions, or another issue may arise before settlement.
Where completion of your new purchase depends upon completion of your existing sale, your solicitor can advise on a special condition appropriate to those circumstances.
Will a Seller Accept a Subject to Sale Offer?
A seller is not required to accept an offer containing a subject to sale condition. Whether they accept it is a matter for negotiation between the parties.
From the seller’s perspective, an offer that depends upon another property transaction may involve greater uncertainty than an offer without that condition.
A seller may take into account factors such as whether the buyer’s existing property is already on the market, whether it is already under contract, the proposed timeframe and the other terms of the offer.
Can the Seller Continue Marketing the Property?
Whether a seller can continue marketing the property, and what happens if another buyer makes an offer, will depend on the terms of the contract and any special condition that has been agreed.
Some specially drafted arrangements may contain provisions dealing with continued marketing or another offer being received. These provisions are not an automatic part of every subject to sale arrangement. Buyers should understand exactly what rights the seller retains under the proposed special condition before signing the contract.
What Happens if Your Existing Property Doesn't Sell?
The answer depends on the wording of the special condition. The condition should specify what happens if the required event does not occur within the agreed timeframe and what rights are available to the buyer, seller or both parties.
You should not assume that an unsuccessful sale automatically brings your new purchase contract to an end. The contract must be reviewed to determine the parties’ actual rights and any notice requirements or deadlines that apply.
Buying and Selling at the Same Time
When your existing property has sold and you are purchasing another property, it may be possible to coordinate the two settlements. This can be particularly important when the proceeds from your sale are required to complete your purchase.
However, the two contracts remain separate transactions. A delay or problem with one transaction can potentially affect the other, particularly when the timing or funding of the purchase depends on completion of the sale. Your solicitor can help coordinate the transactions and advise you about contractual dates and any issues that arise before settlement.
Should You Get Legal Advice Before Signing?
If your purchase depends on selling your existing property, obtaining legal advice before signing the new contract is particularly important. A subject to sale condition is not a standard condition of the REIQ residential contract and will generally need to be included as a special condition.
Special conditions can affect your rights and obligations under the contract, so the wording needs to reflect your particular circumstances. Your solicitor can review the proposed contract, explain how the condition operates and ensure you understand the relevant deadlines and obligations before you sign.
Buying and Selling Property in Queensland?
Buying your next home while selling your existing property is possible, but the contractual arrangements need to reflect how the two transactions are connected.
Bush to Beach Legal assists Queensland buyers and sellers with property contracts, conveyancing and transactions involving the sale and purchase of property.
If you are considering making an offer that depends on the sale or settlement of your existing property, contact Bush to Beach Legal before signing the contract so the proposed conditions can be reviewed for your circumstances.
Disclaimer: This article provides general information only and does not constitute legal advice. Property contracts and special conditions can vary, and your rights and obligations will depend on the terms of your contract and your individual circumstances. You should obtain legal advice about your specific situation before signing a contract or taking action in relation to a property transaction.
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