Nor'West News: December 01, 2022

16
Thursday December 1 2022
RAY WHITE PAPANUI NEWS
Being A Subject To Sale Purchaser
hen buying a property subject to the sale of
Wanother you need to consider all your options
carefully
Buying a property when you are a cash buyer
is reasonably straightforward in that you find
a house you like then put an offer in subject to
usually ten working days due diligence and then
you go unconditional. Purchasing a home when you
already own one is another scenario altogether and
usually more complicated. Many people are selling
for up-sizing, downsizing, schooling, proximity to
work, changing suburbs, upgrading in style, location
or property age. Below I have outlined some of the
more common scenarios that could play out when
you are in a subject to sale position.
Purchasing another property without selling first
Maria Paterson
Licensee
Salesperson
027 543 4689
Eneka Burroughs
Licensee
Salesperson
021 117 0380
Vanessa Golightly
Business Owner
and Licensee Agent
Ray White Papanui
027 664 9292
Tracy Thomson
Licensee
Salesperson
027 440 3035
If you are lucky enough to have your home freehold
or close enough to it (a big chunk of equity will
help) then the bank may be happy to offer you a
mortgage so you can go and purchase something
else without having sold your current house first.
This will take some of the pressure off and the
worry that you may sell but not find anything else.
The fish hook here can be evidencing to your lender
your ability to service the mortgage until your
current home has been sold. Retirees or those near
to retirement, this could affect you if you have no
‘income’. The other mistake I see people making
with this option is that they make an assumption
on what their current home is worth and purchase
the next one based on this ‘figure’ only to find out
when they do go to sell that this figure is overly
optimistic.
Selling your current home without
having yet purchased another property
This option is often taken up by those who would like
to know a) exactly how much their current home will
sell for so they have a concrete purchasing budget to
work with and b) would like to be cash purchasers in
the marketplace. Being ‘cash purchasers’ does allow
you to be more competitive in multi offer situations
and also allows you to purchase property at auction
and therefore opening your buying options up to
homes being sold under all methods of sale. The
biggest risk here is that you won’t find anything to
buy and settle on before your own home handover
date. Many however keep renting or staying with
family as backup options.
The security of knowing where you are going
versus having the confidence that you are
spending what you only have seem to be valued
quite differently by purchasers in my experience,
the thought of not knowing where you are going
worries some while the the idea of spending money
that you might not end up having in the hand gives
others the cold sweats.
Offering on a property subject to the
sale of your current home
This is an option that interestingly I notice many
people beginning with but often not completing on.
I know this sounds like a strange comment but let
me explain. When homeowners have been sitting
comfortably for some years in a home then start
to think a move might be an idea, the nest is finally
empty, the stairs are getting a bit much, they would
like to be closer to family and so on they will often
go out and have a look around and then make an
offer subject to the sale their home.
I will outline the pro’s and con’s for this scenario;
Pro’s. You have found a home you like to move into.
Con’s. Your offer will highly likely contain a
‘rollover’ or ‘cash out’ clause. What does this
mean? If the owners of the home that you have
made your offer on receive a cash offer (or more
favourable depending on the terminology used in
the clause) from another buyer you will be given
via your lawyer a few working days notice (2-5 is
standard) to confirm on the purchase, this means
you need commit to the purchase without having
sold your property – not something many people
are in a position to do because if they were they
would have purchased the home outright in the
first place. You could end up in the position of being
in the middle of selling your home only to have the
property you were hoping to purchase taken away
from you, this can be emotionally very upsetting
and stressful.
The second drawback to the ‘subject to sale’ offer
can be one that I touched on earlier which is not
selling your home for the figure that you had in
mind or worse not selling it at all. Predicting market
trends is somewhat a crystal ball gazing activity and
relying on RV figures, the figure that a website told
you your home was worth, what your son told you
or even appraisal figures from agents are all guess
work to some extent until the market is tested and
the current buyer pool has spoken. You can want
or hold out for a certain sale price all you like but
don’t expect the homeowners you have put an offer
to subject to the sale of your home to wait around
for you.
The third drawback which is one less considered
until you arrive in the situation, is that as a subject
to sale purchaser your negotiation powers are at
an all time low. In smaller or slower marketplaces
or for example rural or high end properties this
may not so much be the case but in general
metropolitan areas shopping in the price bracket
of the majority your subject to sale offer is always
going to be weaker than a cash offer unless you
can come up with the magic figure that will give the
homeowners enough confidence to accept your
offer over a cash one. I often say putting a low offer
in subject to the sale of a property is like wanting to
have your cake and eat it too. Cash is king so your
subject to sale offer needs to win out with a solid
offering price, especially in multi offer situations.
Summary
If you sell first and are in a cash position then you
certainly have stronger negotiation powers and
the opportunity to secure the home you want.
This is the reason for my earlier comment that
purchasing subject to sale is an ‘option that I
notice many people beginning with but often not
completing on’. It doesn’t take long before many
are awakened to the limitations and frustrations
of trying to purchase subject to sale. Sometimes it
will work out and again in a less competitive market
you shouldn’t have quite the same frustrations.
Otherwise my best advice is to sell first then you
know a) exactly what you have to spend and b) you
can go out and purchase your new home as a cash
buyer. Yes it will be a mucky six months or so and
yes you might have to stay with family, short term
in and AirBnB etc but in the long term scheme of
things it will be a distant memory!
Just Listed
7 Truman Place, Bryndwr
Tracy Thomson & Eneka Burroughs
48 Woodville Street, St Albans
Eneka Burroughs & Tracy Thomson
12 Brookwater Avenue, Northwood
Maria Paterson & Vanessa Golightly
Just SOLD
10 Tilford Street, Opawa
Vanessa Golightly & Maria Paterson
4b Rose Street, Hoon Hay
Vanessa Golightly & Maria Paterson
1/131 Colombo Street, Somerfield
Vanessa Golightly & Maria Paterson
10 Erin Crescent, Mairehau
Tracy Thomson & Eneka Burroughs
Winston Residential Limited Licensed (REAA 2008)