A subject to sale clause allows you to make an offer on a new property contingent on selling your existing home first.
While this clause can provide breathing room as a home buyer in BC, it also comes with significant risks if you’re on the other side of the table as the seller.
We’ll walk you through everything you need to know about subject to sale clauses for your BC real estate transaction. So, you’re confident in your deal as a seller or buyer.
Subject to Sale Clause in an Offer: The Basics
A subject to sale clause is a condition written into a residential Contract of Purchase and Sale agreement that makes your offer contingent on the successful sale of your current home.
In short, this clause tells the seller: “I want to buy your property, but only if I can sell mine first.”
Below is an example of a typical subject to sale clause that may be included in a real estate offer:
“This offer is subject to the successful sale of the buyer’s current property located at [Buyer’s Property Address] by [Specified Date]. If the buyer’s property is not sold by this date, this offer shall be deemed null and void unless otherwise agreed to in writing by both parties.”
In BC’s real estate contracts, this clause typically includes several key components that you’ll need to watch out for:
Address specifications: This will clearly outline the buyers property address they are selling, that the clause is contingent on
Timeline specifications: You’ll need to set a realistic deadline for when your current home must sell. This period usually ranges from 15 to 90 days. Depending on if we’re in a sellers market or buyers market, and your specific situation, too.
Removal conditions: It’ll also outline Clear terms outlining what happens if your home doesn’t sell within the specified timeframe, including your right to remove the clause or walk away from the deal.
Backup offer protocols: Many clauses include provisions allowing the seller to continue marketing their property and accept backup offers during your subject period.
A typical Back-Up Clause would look like:
“Back-up Contract Clause – Subject to the seller ceasing to be obligated in any way under the previously accepted Contract of Purchase and Sale on the subject property on or before (date). This condition is for the sole benefit of the seller.”
The subject to sale clause is particularly common when upsizing your home or relocating within BC. It provides a safety net that prevents you from owning two properties simultaneously or being forced into a rushed sale.
Recommended Resource: Subject Removals Guide for Home Buyers & Sellers in BC
Risks Involved With Subject to Sale Offers
There are some upfront risks you should understand as either a buyer or seller, so you’re fully equipped with how to handle these specific situations throughout the deal.
Risks as a Seller
When you accept an offer with a subject to sale clause, you’re essentially taking your property off the active market while you wait for the buyer’s home to sell. This creates
several potential complications:
Extended market exposure: Your property may sit in limbo for weeks or months, potentially missing other interested buyers who could have made unconditional offers.
Market timing concerns: Real estate markets can shift during the subject period. If prices decline while you’re waiting, you might miss the opportunity to sell at peak value.
Backup offer complications: While you can accept backup offers, managing multiple potential buyers requires careful coordination and clear communication to avoid legal issues.
Seasonal market impacts: In Metro Vancouver, real estate activity typically slows during winter months. A subject to sale clause that extends into slower seasons could significantly impact your selling timeline.
Risks as a Buyer
The primary risk involves market volatility affecting your current home’s sale price. Metro Vancouver’s real estate market can experience rapid changes. Local markets can differ, too.
For example, if you’re selling your home on Vancouver Island to move to Burnaby, the different local markets could be slow and you may have trouble selling your current property. Or, accept a lower price than planned in order to close on your new home.
As a buyer, you face much less risk for including this clause. A lot of the risks are placed on the seller, if they accept your offer.
Advantages & Disadvantages for Sellers
If you’re a seller and you’re thinking of accepting an offer that has Subject to Sale clause, be careful and think on this decision before diving in. Here’s why.
Advantages
For sellers, maintaining the ability to continue showing your property and accepting backup offers during the subject period is important. This does require a separate clause, but you’ll avoid losing the sale entirely if market conditions make it difficult for buyer to close.
Disadvantages
The disadvantages for sellers centre around the reduced negotiating power and extended uncertainty. Your property will remain ‘unsold’ while the buyer looks to sell. Ultimately, this can leave the entire deal on the decisions of the buyers. If they don’t accept an offer on their home, it can collapse the deal. Leaving you with having to re-list and go through more work and timelines to get it sold.
Advantages & Disadvantages for Buyers
As a buyer considering a subject to sale clause, you’ll need to weigh several factors that could work for or against your interests.
Advantages
A big advantage for buyers is avoiding the need to carry two mortgages, while you sell your current home and buy your next property. This clause also provides flexibility to secure your next home without the pressure of a rushed sale on your current property.
Disadvantages
The main disadvantage for buyers is that your offer becomes less attractive to sellers compared to unconditional offers, or more flexible options. So, you can potentially lose out if it’s a competitive market or hot property. The clause creates uncertainty about whether you’ll ultimately secure the new home, making it difficult to plan your move.
Navigating Clauses with a Professional
As you can see, this is where things can get tricky in a real estate deal. That’s why it’s important to work with an experienced real estate professional, like our team. A knowledgeable realtor can help structure the clause to protect your interests while maintaining appeal to the other party.
Buyers
For buyers, your agent should help you set realistic timelines based on current market conditions in your area of Metro Vancouver. They can also assist with navigating any backup offer clauses, or other clauses a seller may add if they accept your offer. Learn more how a real estate professional can help you as a buyer.
Sellers
For sellers, professional guidance helps you keep the deal moving properly with subject to sale offers. Your realtor can also manage backup offer procedures and communicate effectively with all parties during the subject period.
Making the Right Decision for Your Situation
Subject to sale clauses serve an important function in BC’s real estate market, but they’re not suitable for every situation.
Remember that real estate transactions involve significant financial and legal commitments. Taking time to understand all implications of subject to sale clauses, working with qualified professionals, and maintaining realistic expectations will help you navigate these complexities without the stress.
