Subject-to sales

The ideal situation is certainly that the buyer of a property does not have to sell a property in order to buy a property, or that he has already sold his property and that all suspensive conditions relating to that sale have been met. From the buyer’s perspective, it means that he is in a strong position to negotiate the price and conditions of the sale; from the seller’s perspective, it means certainty that transfer is likely to be registered within a reasonable period.
But we do not live in an ideal word. Sometimes buyers find their dream home before they have sold their current property, and they need to sell and cancel their present bond before they will be in a position to afford the new property.
What are the implications of buying a property, subject to the sale of another property?
If the buyer’s property still has to be sold, the sales agreement will usually determine that the seller may continue to market the property until such time as the buyer accepts an offer on his (the second) property. Should the seller receive a further offer on the property which he would like to accept, the sales agreement would usually make provision for a copy of the “new” offer to be handed to the purchaser, who then has time (usually 48 hours, but this period is stipulated in the sales agreement) to waive the suspensive condition of selling his (the second) property . In other words, the purchaser then undertakes to buy the property without selling his property. If the purchaser cannot do that, the sales agreement lapses and the seller is free to accept the second offer. If the purchaser waives the suspensive condition of selling his property, it means that he has to come up with the money in another way and that guarantees are due within a specific period.
Should a purchaser waive the suspensive condition and he is then not able to deliver guarantees for the purchase price at the time stipulated, he will be in breach, and the seller may cancel the sales agreement after a notice period as stipulated in the agreement. Furthermore, the seller may retain any deposit as “rouwkoop” and may also claim damages from the purchaser. For this reason, a purchaser who made an offer on a property subject to the sale of a property, should only waive this suspensive condition if he is 100% certain that he will be able to deliver guarantees when required.
Often a buyer’s property has already been sold, and is in the process of being transferred. These buyers often regard themselves as cash buyers, as they will be able to purchase the property with the proceeds of the sale of the second property. Be careful. A buyer is only a cash buyer when he already has the money in the bank. If the transfer process is still under way, it is wise to link the purchase of the property to the sale of the second property. If the sales are linked and anything then goes wrong with the transfer of the second property, the purchaser does not have to come up with money that he does not yet have.
What can go wrong, you may ask. At worse, the purchaser of the second property may die and the sale may be either cancelled or become part of an estate. The purchaser of the second property may also default by for instance not signing documents for paying transfer costs, which could cause delays. If the sale of the two properties is not linked, a nonperforming purchaser of the second property will not allow the purchaser to withdraw from the sales agreement. He will be in breach if he does not deliver guarantees timeously, and the seller will be able to claim damages from him – even when the problem is caused by the purchaser of the second property.
If it is this tricky, why would sellers consider an offer which is subject to the sale of another property?
Firstly, it may be a good offer financially. If a seller has two offers, of which one is a “clean’ offer (not subject to the sale of a property) and the other an offer subject to the sale of a property, but also much higher, the seller may decide to accept the higher offer – especially if he has time to wait for the sale of the second property and does not need a speedy transfer.
Secondly, it may be clear to the seller that the purchaser is likely to sell his property at his required price within a reasonable period. A good agent will be able to advise a seller on the likelihood of this.
Thirdly, until such time as the purchaser sells the second property, the seller is entitled to continue marketing his property and he may accept such further offer if the purchaser cannot waive the suspensive condition of the sale of his property. The time period allowed for this waiver is quite short, and the seller is unlikely to lose an interested buyer which makes a good offer because of the offer already on the table.
It is important to note that the terms of the sales agreement - such as price and occupation date - remain unchanged. If a seller has accepted an offer and gets a further, higher offer from another buyer, he cannot insist on the price of the first offer to be increased.


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