Over the last three months there has been a growing trend for homebuyers to make offers to buy another property based on selling their own property – commonly referred to as a ‘subject sale’ according to Shaun Yeo, Sales Manger of JonesBallard Property Group

“During the March quarter, for example, subject sales, accounted for over 25% of all of the homes sold by the Jones Ballard Property Group. This time last year, subject sales accounted for less than 5% of all sales through our company.

“More buyers who want to upgrade their home are deciding to use the subject sale technique rather than taking the more common practice of home to home finance (bridging loan). Due to the uncertainties caused in the housing market created by higher house prices and rising interest rates, homeowners are taking a more conservative approach to buying a new home and this is why they are increasingly opting for subject sales.

“This issue of subject sales is therefore an important new trend for existing homeowners to understand and use to their advantage. Unfortunately many home owners who are trying to sell their property, are reluctant to accept an offer from another property owner based on that owner selling their property.

“Many owners believe that accepting a subject sale offer is effectively locking them into an agreement which excludes other buyers with finance approval from buying their property or that the property owner making the offer may not be able to sell their property and inturn they will not be able to sell their own home. These fears held by homeowners can simply be overcome by attaching a special condition commonly known as a “48 Hour Clause” to the subject sale.

“A 48 hour clause simply allows a seller to continue to market their property after accepting a subject sale offer, with the hope of receiving a cash or subject to finance offer. Should a second buyer present a more attractive offer, the seller can invoke the 48 hour clause and request that the first buyer makes their offer unconditional.

“The essence of a subject sale is a written contract where the prospective buyer agrees to buy your home based on selling their own home within a specified period of time determined between the seller and the buyer.

“If the subject sale buyer offers say $500,000, this does not prevent someone with a cash offer or offer subject to finance approval from making a more acceptable offer and potentially buying the home.

“If another more acceptable offer is made then a “48 Hour Clause” is invoked where the person making the subject offer has an opportunity to make their offer “unconditional”, effectively giving them the “first right of refusal”. If they make their offer unconditional, then they must proceed with settlement within a specified time frame, regardless of whether they have sold their home or not.

“If the first buyer is unable or unwilling to convert their offer to unconditional status, then they are provided with written notice that their contract has come to an end, and the second buyers offer comes into effect.

“Sellers should not be scared of a subject sale, remembering that a buyer who is keen enough to make a subject sale offer and get their home onto the market at the right price is probably the person who will pay the right price for your home, and the old saying of, “one in the hand speaks volume”.

“The seller can still market their property to other potential buyers (provided a 48 hour clause has been attached to the contract) with the hope of receiving a better offer even though someone has made a subject sale offer,” he said.

Mr Yeo said that another benefit for a Seller is once they have a subject sale offer with a 48 hour clause, it confirms the value of the property to other prospective purchasers who then feel more at ease to make another offer.

“A good tip for the home seller is to get your agent to handle the sale of the second property. From an Agent’s point of view, if you are handling both sales then you obviously have better control over the transaction and are better able to service both parties, and ensure a smooth and trouble-free transaction.

“For anyone making a subject sale offer, the main advantage is that they are in a unique buying position because a seller can only receive one subject sale offer on a property at a time. Therefore the Buyer may limit the competition on the property by getting in first with their offer. They also put themselves in a good position to secure the property if their offer is a good one as the likelihood of a better offer coming over the top is rare.

“Anyone who is considering buying a home using the subject sale technique should remember to price their home correctly. By correctly pricing their property, they will make a quick sale and be in a stronger position to secure the property they want to buy.

“Another important issue for someone using a subject sale technique is the 48 hour clause. They should consider what conditions to the contract will be waived should they go unconditional. For example, some property buyers mistakingly waive the right to a pest inspection which has formed part of the original contract but has not yet been carried out” he said. “When using a “48 Hour Clause” on a contract, it is critical to ensure that the rights and obligations of all parties are clearly understood”.