Selling a home before finalising the purchase of a new one can lead to many problems. In the current residential property market’s high demand conditions, those planning to sell their homes may well find, especially if they are in popular suburban areas of South Africa’s big cities, that once it is known that the home is coming onto the market, potential buyers (and rival estate agents) may be at their door before they have had time to sort out their future moves.
This situation, says Tony Clarke, Managing Director of the Rawson Property Group, can lead to home owners selling before they have managed to buy a new home – and all his experience indicates that this can be highly disruptive to family life.
“Most families,” he says, “intensely dislike moving home and having to do this twice, i.e. by moving first into rented premises for a time, can be particularly irksome to them. If, of course, they are transferring to another city or to an area well away from their current position, it may be that renting for six months to a year is the course to take so as to give them time to get know their new area and to find a suitable home, but in general it is more satisfactory to move directly from one home to another if this is at all possible.”
Those who try to achieve this, says Clarke, usually start making offers on new homes well before they have actually sold their own – and they can, to an extent, protect themselves in this situation by making their Offer to Purchase conditional on their selling their existing home.
So far, so good – but there can be a catch here too: a shrewd buyer when advised by a good estate agent will almost certainly in the document accepting such a deal insert what is known as an ‘acceleration clause’. This will entitle the seller if he receives another offer which he likes and which he considers satisfactory to insist that within a stipulated time period – sometimes as little as 48 or 72 hours, sometimes a week or more – the Offer to Purchase is made unconditional, i.e. is no longer subject to the sale of the buyer’s existing home.
“Obviously if the new offer is a good one - is in cash, at a satisfactory price, or is backed by an already guaranteed bond – the seller is not going to wait around for the first buyer to sell his home. However, in many cases the new offer may not be as good as the original one and when this happens a knowledgeable estate agent can often persuade the seller to extend the acceleration clause long enough to enable him to sell his existing home and get the necessary money into his bank account.”
“All in all, however, it is wise as far as possible to avoid selling one’s existing home until the deal on the alternative home is assured,” says Clarke.
