When selling a property, it’s useful to have a backup offer on the table in case the original offer falls through.
Although sellers may struggle to sell their homes when the property market takes a tumble or slows to a trickle, the picture is very different when demand for well-priced homes is high. Suspensive sales have always been a little problematic, given that the sale hinges on a number of factors that are completely out of a seller's hands.
Many homes are sold subject to the buyer securing bond finance. Generally this doesn't cause that much of a problem as banks usually revert fairly quickly, giving the buyer a clear indication whether or not they are willing to finance the purchase.
Homes bought subject to the sale of another property however are another matter entirely. Sellers have no control over this end of the deal and are essentially at the mercy of the buyer, who may or may not sell his home within the time period stipulated in the sales agreement. The situation can become even more complicated when a third buyer, also reliant on selling his property, puts in an offer on the first buyer’s property, subject to his sale going through. All three sales could collapse if one of the deals falls through.
The situation can however be brought under control if there are back-up offers in place, a practice which, according to Carol Reynolds, Pam Golding Properties area principal in Durban, Durban North and La Lucia, is becoming more commonplace in areas where demand is outstripping supply.
A back-up offer is an offer made on a property that already has an offer to purchase in place.
“From a seller’s perspective, having a back-up offer is a wonderful contingency plan and provides a great ‘insurance’ policy. In the event of the first offer falling away, a second offer is safely in place," says Reynolds.
Cash buyers, those who have pre-approved finance and those who have already sold their homes before finding a new property are always going to be in a stronger position than those who are restricted by the sale of their existing properties. The seller obviously wants the deal to go through as quickly as possible, with the minimum amount of fuss, and as such is likely to jump at the chance of a second offer being on the table.
This of course does not mean that the seller can change any of the conditions or time frames documented in the initial offer. It's also worth noting that a second offer will only come into play once all the conditions - such as a deposit being paid and bond approval secured - have been met.
Reynolds notes that the seller is only entitled to place the first purchaser on notice once the second offer is secure. "Most sale agreements will have a clause that affords the first purchaser a reasonable time within which to waive the suspensive condition and make his offer unconditional, so as to avoid losing the sale." In other words, a seller may not cancel a sale simply because they have received a better offer or one that has less restrictive suspensive clauses - the first offer has to run its course and can only be cancelled if and when the buyer fails to meet the deadlines/conditions in place.