Buying Before You Sell in WA: What You Need to Know About Subject-to-Sale Offers
Finding the right property before selling your existing home can leave you with a difficult decision.
Do you sell first and risk having nowhere suitable to move to? Or do you try to secure your next home while your current property is still on the market?
For many Western Australian buyers, a subject-to-sale offer can provide a practical way to buy before selling. However, the contract may also include an important special condition commonly called the 48-hour clause, or more properly the Two Business Day Condition.
Understanding how a subject-to-sale offer and the Two Business Day Condition work before you sign can help you prepare for a time-sensitive decision later.
What is a subject-to-sale offer in WA?
A seller might accept a subject-to-sale offer when the buyer presents a credible path to selling their existing property within the agreed timeframe.
In a highly competitive property market, sellers may favour buyers who can make an unconditional or subject-to-finance offer. However, market conditions change, and a well-prepared subject-to-sale offer may still be attractive where the buyer’s existing property is market-ready, realistically priced and expected to attract interest quickly.
A subject-to-sale offer can work for both parties, provided the contract conditions are clearly drafted and understood before the Offer and Acceptance is signed.
What is the 48-hour clause or Two Business Day Condition?
The 48-hour clause, now more properly known as the Two Business Day Condition, is a special condition that may allow the seller to continue marketing the property after accepting a subject-to-sale offer.
The condition is not automatically included in every subject-to-sale contract. It must form part of the Offer and Acceptance where the parties agree to its use.
If the seller receives another offer they wish to accept, the condition may allow them to notify the original buyer. The original buyer then has a short period to take the action required by the contract.
Does the 48-hour clause mean 48 consecutive hours?
The 48-hour clause does not necessarily mean 48 consecutive hours because the commonly used condition is expressed as two business days.
Weekends and public holidays may therefore affect the deadline. The precise start and expiry of the notice period will depend on the wording of the special condition in your contract.
If you receive notice under a Two Business Day Condition, check the contract and contact your settlement agent promptly so the relevant deadline and settlement implications can be identified.
What must a buyer do after receiving a Two Business Day notice?
After receiving a Two Business Day notice, the buyer must take the action required by the subject-to-sale condition within the period stated in the contract.
Depending on the wording, the buyer may need to obtain a contract for the sale of their existing property or decide whether they can waive the benefit of the subject-to-sale condition and proceed without relying on that sale.
This may require urgent discussions with your lender or mortgage broker about alternative finance, including whether bridging finance may be available.
Satisfying or waiving the subject-to-sale condition does not necessarily remove every other condition in the contract. The purchase may still be subject to finance or another separate condition, which is why the signed contract must be reviewed as a whole.
What happens if the buyer cannot satisfy the condition?
If the buyer cannot satisfy the Two Business Day Condition within the required timeframe, the original contract may come to an end and the seller may be free to proceed with the alternative buyer.
The actual outcome depends on the wording of the contract and whether the required notice and procedural steps have been followed.
This can be extremely disappointing and may create pressure to waive the subject-to-sale protection quickly. That decision should not be made without understanding the financial and contractual consequences.
What are the risks of waiving a subject-to-sale condition?
Waiving a subject-to-sale condition may commit the buyer to completing the purchase even if their existing property has not sold.
Before giving up that protection, you should be satisfied that you have the financial capacity to proceed. This may involve speaking with your bank or mortgage broker about bridging finance or another form of funding.
Do not waive the condition solely because you are worried about losing the property. First confirm what the contract requires, what other conditions remain and whether you can complete the purchase without the proceeds of your sale.
How can you prepare before making a subject-to-sale offer?
Preparing your existing property for sale before making a subject-to-sale offer can reduce delays if the offer is accepted.
Ideally, your property should be as close to market-ready as possible. You may wish to have:
• Your selling agent appointed
• Photography and floor plans arranged
• Maintenance and presentation work completed
• Your marketing campaign prepared
• An appropriate asking-price strategy discussed
• Your finance reviewed with your lender or mortgage broker
If your offer is accepted, being ready to launch your property immediately can be valuable. Every week your home is not on the market is another week in which the seller’s property may attract interest from other buyers.
Why should you have a financial Plan B?
A financial Plan B can help you respond quickly if you receive a Two Business Day notice before your existing property has sold.
Before entering the contract, consider the following questions:
• Could you complete the purchase without selling first?
• Would your lender consider bridging finance?
• How much equity do you have available?
• Do you need the proceeds of your sale to complete the purchase?
Knowing the answers in advance can put you in a stronger position if you later have only two business days to make a decision.
How do you coordinate buying and selling property at the same time?
Coordinating a property purchase and sale at the same time requires careful management of both contracts, their conditions and their settlement dates.
There may also be finance requirements, deposit arrangements and sale proceeds that must be available to complete the purchase. When the purchase is subject to sale, the timing of each step becomes even more important.
At Vicki Philipoff Settlements, we regularly assist clients who are selling and purchasing property at the same time. Providing your settlement agent with both contracts as early as possible allows the key conditions and dates to be identified and the settlement process to be coordinated.
What should you do if you receive a Two Business Day notice?
If you receive a Two Business Day notice, contact your settlement agent and finance provider immediately.
The timeframe is short, and the financial and contractual consequences can be significant. Your settlement agent can help identify the relevant condition, deadline and settlement implications. If legal advice on the contract is required, you may also need to speak with a legal practitioner.
Before waiving any contractual protection, confirm exactly what the contract requires and whether you can complete the purchase if your existing property does not sell.
Need help coordinating your property purchase and sale?
Vicki Philipoff Settlements can help coordinate the settlement requirements involved when you are buying, selling or managing both transactions at the same time.
Contact our team as early as possible so we can identify the important dates and conditions affecting your settlement and help you understand what needs to happen next.
This article provides general information only and should not be relied on as legal or financial advice. The operation of a subject-to-sale condition or Two Business Day Condition depends on the wording of the individual contract. Buyers and sellers should obtain advice appropriate to their circumstances before making decisions under a contract.
