Special Clause Offer - what does that mean?
A "Special Claus Offer, also referred to as a purchase contract with a "Sale of Buyers Home Condition", is used when a buyer of real estate has not yet sold their previous home, and either needs or wants to sell that home before committing to buying the next home.
Why is a Sale of Buyers Home Condition required?
In some cases a home owner may wish to move, and ends up finding the home that they would like to purchase, BEFORE they have successfully sold their current home. If the buyer of the new home is not able to qualify for financing to keep both homes, or if they decide that they absolutely do not want to have the chance of ending up owning two properties, they may decide to use a Sale of Buyers Home Condition in their offer to purchase the next home. This means that their offer on the new home is subject to the sale of their current home. If their current home does not sell, they are under no obligation to move forward with the purchase of the next home. Its a safety net, that prevents you from taking on unnecessary risk when buying your next home.
How does it work?
When writing the offer on the new home, we will include an addendum to the contract containing the Sale of Buyers Home Condition. This will have information including the address of the home you are selling, the list price, when the home will be listed on the MLS(if its not already), and how long you are proposing they give you to sell the home. The sellers realtor will go over your offer with them, and they will complete a Comparative Market Analysis on your home to make sure that the home you are needing to sell, will be listed at a fair price, and that it is likely you will sell it in the current market. If the sellers realtor thinks you are pricing the home too high, and that it may not sell, they will likely advise their clients not to accept your offer. So you must have an honest conversation about the market value of your current home. Trying to put this condition in your offer, when you are attempting to sell your home above its market value, will likely prevent a deal from coming together. Ultimately, the seller of the home you are trying to buy, has to agree with the time frame, and the price point at which you are going to sell your home. If they do not agree with your proposed price and timeframe, they may either reject your offer all together, or counter your offer with a time frame and price that they would agree to.
Typically, a Sale of Buyers Home condition would give the buyer somewhere between 30 and 60 days to meet the condition, and sell their home. The important thing to know with these contracts, is that the wording of the contract provides the seller the right to continue to market their home for sale. And, if they receive another offer that they would like to accept, they will be required to notify you, at which point you would have to either waive the Sale of Buyers Home condition, or, your contract would become null and void, and they would accept the other offer. The amount of time that you have to waive the condition in a case like this will be pre-determined in your offer to purchase. In most cases it will be approximately 48 hours that the buyer will have to waive the Sale of Buyers Home condition.
Individual cases vary, and timelines and other details can be quite different. If you are thinking of buying a home, but want or need to sell yours first - contact me for more information. There are a few options in these cases, and I can help you determine which will work best for you.