3 Tips to Protect Your Clients from "Sale of Property" Conditions

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When markets are slower, we see an increase of "sale of Property" conditions.

This of course, is when a buyer makes their offer conditional upon them being able to sell their home. 

There is a standard condition in WEBFORMS named "Buyer's Property" that reads likes this:

This Offer is conditional upon the sale of the Buyer’s property known as [ADDRESS]. Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than [TIME] on the [DATE], that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller as aforesaid within the time period stated herein.

And this is what I usually see on signed agreements.

Offers with this kind of condition risk taking your seller's property off the active market while a buyer fails to make a genuine effort to sell.

But there's nothing inherently wrong with accepting an offer with a Sale of Property condition - if you're using best practices.

Here's what I recommend:

1) Gather Your Information
If the Buyer's property is already listed, take a look at it.

What kind of property are they selling? Are they using a reputable agent? Is the listing over priced? Did they take pictures on their cell phone? What are the buyer's expecting to sell their home for?

Part of your job is to advise whether there's a legitimate chance of that property being sold.

If they're asking too much for their own property and fail to see that, that offer could ultimately be useless.

2) Negotiate The Clause
I don't love the standard "Sale of Property" condition because it fails to a real obligation on the buyer to make an effort to sell.

Let's say their property is not listed yet. My advice is to counter that "Sale of Property" condition with more details.

Add things like:

• a deadline for the buyer to list their property on the MLS
• a predetermined listing price
• an obligation to list with a Realtor and have professional photos taken

This does two (2) things, it ensures the buyer is serious and committed (if they are, this shouldn't be a big ask), and it provides actionable deadlines to monitor the status.

3) Keep your options open
If possible, include an escape clause.

This is basically a provision that allows the Seller to continue to market and show the property during the conditional period - with the ability to accept a second offer.

If the Seller accepts a second offer, the the original Buyer retains a first right of refusal to firm up their offer. The buyer is given a timeline (usually 24-72 hours) to either remove their condition or walk away from the deal.

You need to advise the second offer that it must be conditional upon the first buyer walking away.