In real estate, buying your first home is a huge step, but up-sizing or downsizing can be even more stressful
. For first time home buyers, they’ve saved up 5-20% of their purchase amount and need to go out home hunting for their first purchase. It is important to them to make a smart investment, a good move based on their needs and the current market. For someone looking to sell their first or second home to move into their next home, all the same added pressures follow, however now most of their equity is stuck in the first property which means they need to sell their current residence to buy the next one. Sounds confusing right?
Buying and selling is already stressful enough which is why we use realtors to simplify the process – Imagine worrying about being homeless should you not find a home in time. The solution? Start shopping and make offers conditional to the sale of your home. BIG NO-NO IN OUR BOOKS!
What is a conditional offer?
Every offer is conditional upon standard clauses such as inspection and financing, but a true “conditional offer” means that the purchase of home X is dependent on the sale of home Y within a certain time frame. Should home Y not sell within the given time frame? then the offer is rendered null and void and the sale just… falls through. I bet you are wondering why any seller would consider this type of offer…. Well you are right, Let’s explain how this type of offer is unfavourable for both buyer and seller in a few short sentences and what we suggest.
Why is a conditional offer unfavourable for sellers:
If you are planning on selling your home, you plan to do just that
your goal as a seller is to obtain the most amount of money possible, as quickly as possible and with the least amount of strings attached. The longest string that exists is the offer conditional to the sale of another immovable. For obvious reasons, waiting for someone else to sell their home to be able to buy yours is not ideal, and unfortunately never ends up being something most sellers are willing to work with for multiple reasons:
– It limits their buying power, as until their buyer’s home is sold, they cannot make unconditional offers on other properties
– It creates a black cloud over their home which may scare away other purchasers from making an interesting offer due to the risk of losing the home to another buyer.
– If the buyer’s home does not sell, the seller is back to square one with nothing but an unsold home.
That being said, the chances of a conditional offer being accepted are already slim, but when the seller does accept one, it isn’t necessarily always favourable to the purchaser, Lets look at why.
Why is a conditional offer unfavourable for buyers:
If you are looking to buy a home, and still need to sell your property, oftentimes it can be daunting to make the first move and list your home out of fear of ending up homeless or without a place to live. So naturally we opt for the easiest solution which is a conditional offer. Might seem peachy at the start but the truth is, an offer conditional to the sale of your home is not as “safe” as it sounds.
When making an offer that is conditional to the sale of your property we use a form (In Quebec) called the Annex R – Residential Immovable. This document states that the promise to purchase is conditional upon the sale of the buyer’s immovable property within a certain time frame (usually 45-60 days). It also however stipulates that the vendors are still allowed to entertain visits and offers from other potential buyers and should they receive any offers that are not conditional upon the sale of another immovable must give the current purchaser a first right of refusal (72hrs to decide if you want to proceed without the sale of your home, or declare your offer null and void).
Although the conditional offer seems safer than jumping into the process with nowhere to go, it is not fully protective and unfortunately still leave you hanging in the long run should things not work perfectly.
What does Groupe Baronello suggest?
Truthfully, the process should always be to sell and then buy, unless you have the financial capacity to purchase without selling your current home (and even at that, we still recommend the opposite). But the steps we recommend to our clients are as follows:
– Organize an in-person meeting to evaluate your current home and discuss what type of property you are looking to purchase.
– Start an automated listing system that sends you all new listings (with your broker) to be able to study, analyze and visit properties for about 3-6 weeks.
– Once you have gotten a feel of the quantity and quality of the homes listed and coming up on the market, make the move to list your home, and ask for a move out delay that seems reasonable to you (based on your niche market) i.e. 60/90/120 or even 180 day move out clause.
– Sell your home, so that you can know exactly how much you are working with for your buying budget, and continue to shop throughout the process.
Sounds easy right? With the proper guidance and vigilance, the process usually goes smoothly and seamlessly. There can be hiccups and stressful times, but overall you can rest assured that when working with professional and courteous brokers, we always have your best interest at heart.