In real estate speak this refers to a “condition” in an offer that makes the offer conditional on the Sale of the Purchaser’s Property (SPP) or Sale of Buyer's Property (SBP) which is the same thing.
In a balanced
or Buyers’ market this is a completely normal condition to include if you
already own a home that you will need to sell before closing on a new property.
Normal but not necessarily easy…
In a
Sellers’ market, this kind of condition – or really including any kind of
condition, can mean the kiss of death for your offer if you’re competing
against an offer that doesn’t include that or other conditions…
When you’re
including conditions in your offer, you’re writing them to YOUR benefit. The
Seller is looking for an offer that benefits THEM. And that’s what negotiations are for, to find terms that
everyone can agree to…
So let’s break it down!
Advantages
to including an SPP condition in your offer:
- Takes the risk out of the
equation for a Buyer who needs to sell their existing home in order to
close on a new home
- Depending on the language of
the condition, gives the Buyer an out if they don’t sell their home for
the amount of money they need in order to purchase the home they’re
offering on
- The Buyers’ deposit is
returned if the condition is not fulfilled or waived
Disadvantages
to including an SPP condition in your offer:
- Can limit your negotiating
power
- When you need the Seller to agree to something that’s not necessarily in their best interest, you can’t be quite as cut-throat in negotiations as you may want to be
- The seller will want to be compensated for the perceived risk & aggravation of accepting this condition & that translates into $$$
- The home you have an accepted offer on continues to be marketed & shown to other buyers with the hope that another offer will come in
- Your accepted offer could get “bumped”
by another offer & you will have a pre-determined amount of time to
either “fulfill” the condition, “waive” it, or walk away with your deposit
- Typically an “escape clause”
goes hand in hand with an SPP condition & will stipulate how much
time you have to respond after receiving notice that another offer has
come in. And by respond, I mean, Fulfill, Waive or Walk. Anywhere from 24
to 36hrs is the norm.
- You will need to be prepared to
shift into high gear if your existing home is not already on the market
& your offer is accepted
- Depending on the language in
the offer you will need to have your home listed on the MLS by a certain
date & you will have a specific amount of time to sell it
That last
point is an important one & there are a number of aspects to this part of
it!
A savvy
Buyers’ Agent is going to first “sell” your home to the Listing Agent & the
Sellers, in order to get the SPP condition accepted. Your house is the best
thing since sliced bread & it’s going to sell in a hot minute! And here’s
why….
- Detailing a competitive pricing
strategy
- Detailing a solid marketing
plan
- Detailing an attractive
timeline
A savvy
Listing Agent is going to carefully assess the property themselves to determine
how confident they are that the property will be sold within the agreed
timeline. If the Buyers’ Agent hasn’t provided all the details, they should be
asking for them – if they don’t agree with the details provided, then they would
be advising the Sellers that the risk/reward just isn’t there for them to
accept the condition.
So what
this means is that a Buyer needs to have all their ducks in a row prior to
making an offer if they know that they will want to make it conditional on
selling their existing home. This is not the time to start prepping the house
for sale or “trying out” a higher list price than what their Agent has suggested…those
things need to have already been done & a specific agreed-upon plan in
place that’s just waiting to get executed!
At the best
of times real estate is a high stakes, sophisticated business & adding an
SPP condition into the mix takes it up yet another notch…but if everyone is on
the same page, well prepared & working with a high degree of professionalism,
this is a scenario that can be navigated successfully for everyone involved! We'll just gloss over the nail biting, teeth gnashing & possible day drinking that the agents behind the scenes are doing trying to make it all come together seamlessly, lol! ;)
All that being
said, if you don’t like the idea of the Seller having you by the “short &
curlies” in a balanced market, then the answer to that is to sell your home
first! You will know how much money you have to work with, you will already have
a closing date to work towards (or arrange bridge financing for) & you will
be on your own timeline & terms! The only fly in this ointment is that it’s
a bit of a leap of faith that the right house will be available, at the right
time, so that you don’t end up homeless or settling for a house that’s not “the
one”. And this is what makes this scenario not right for everyone…
There are
only 2 choices & you have to decide which one you feel most comfortable
with…pick your poison!
Until next time,
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