In short Yes you can put offer in, but unless it is significantly more than the current offer they are unlikely to except.
A house being sold subject to a contract has its advantages and disadvantages. It might not be easy to conclude whether it is safe to put an offer on such a property. First, you should understand what a person means when they say a house is being sold subject to contract. The phrase means that while the house is on the market, the seller is still collecting offers from potential buyers.
If you place an offer in such a property, the seller can choose to accept or decline it. Still, since they are looking for the best deals, they might accept your offer now but end up turning it down a few days or weeks later when they get a better proposal. Having said that, if you feel that a property has the qualities that you want, and you need to put an offer, make sure that you do it wisely.
It is advisable to ensure that you talk to the agent or the owner of the home on sale and agree on specific terms. If they are impressed with your offer, you can ask them to remove the house from the market while you work on exchanging contracts. Usually, properties that are sold subject to contract take long on the market until the seller is convinced that they have received the best offer that the real estate industry can provide.
The Meaning of Under Offer
This is a term that is usually used by real estate agents to indicate that there is a buyer that has made an initial offer to the seller. During this stage, the seller is yet to make a decision whether they are still going to accept that particular offer. But they still keep the house in the market just in case they get something better from a different potential buyer. They can collect as many offers as possible before choosing one to go by. Before the seller accepts an offer, the property is said to be subject to contract.
The Meaning of Sold Subject to Contract
When a landed property is said to be sold subject to contract, this means that the buyer has provided an offer, and the seller has accepted it. However, the paperwork is yet to be complete. This could also imply that both the buyer and the seller are working toward the exchange of contracts.
This will, however, be determined by the results of the surveys, satisfactory contract, and mortgage approval. At this level, the final contract that is bound to make the process irreversible has not been arrived at or signed.Get an Instant Quote >>
Meaning of Exchange of Contracts
The exchange of contracts is the level at which the deposit is made. This is usually around 10% of the total cost of the property, but it could be as low as 5%. In England, if the buyer withdraws after the exchange, they will be in breach of contracts and risk losing their deposit. That is a huge sum of money to lose, regardless of the price of the property being sold.
The process is usually different depending on the location and the law of the land. For instance, the term ‘sold subject to contract’ is unheard of in Scotland.
Is it Safe to Buy Property Being Sold Subject to Contract?
To be precise, the answer to this question is ‘no.’ If a property is being sold subject to contract, this means there is an informal agreement between the buyer and the seller. This means that you are not entirely safe. Though figures might vary, estimates suggest that more than 75% of such sales never go through.
Why a sale might not succeed
Many reasons might make such a sale to fail. For instance:
The seller might change their minds and remove the property from the market
Compared to the accepted offer, the mortgage valuation is a bit lower, hence the lender will be reluctant to offer the funds
The market might change drastically, hence making want to remove your offer
You are a buyer operating from a chain and things suddenly collapse, and you are unable to complete the process successfully
You might as well get gazumped
Meaning of Gazumping
As a buyer, it is important to know that when a property is sold subject to contract, the paperwork has not been completed, and the contracts are yet to be exchanged. This implies that there is nothing to keep other buyers from making inquiries about the same property. This also means that you risk being gazumped. This implies that another buyer comes with a higher offer, and then the seller accepts it despite having accepted your offer.
This is something that has been on the rise according to reports from relevant sources. The gazumping is not seen as illegal, but it is considered immoral. Buyers will not shy away from trying it, especially in situations where demand outstrips supply. Many sellers will always welcome new buyers hoping that they get higher offers compared to what they already have.
If you are the buyer, there is nothing you can do to save such a situation unless you want to submit a higher offer. But that depends on you making a higher offer to a seller who has already let you down once. If you are unwilling to do this, or you are not prepared, then you just count that you have lost the property and start looking again.
What You Stand to Lose
Normally, it can take up to two months to move into a house that is being sold subject to contract. It might even take longer than this. At this time, you need to arrange your mortgage, commission a survey, and instruct a solicitor. If the purchase does not go through, you will lose all the money spent on mortgage advisors, surveyors, and other services.
Now, to answer the question of whether you can put an offer to a house that is sold subject to contract. You can go ahead and do it. But you need to have in mind all the things that are mentioned in this piece. Regardless of the offer that you have placed, it is the buyer who decides whether the house becomes yours. If you place an offer and the seller accepts it, you should ensure that they remove the property from the market so that you are certain about the purchase. If the house is being sold by an organization, then you need to find out its reputation regarding the property being sold subject to contract before placing an offer.
The Final Thought
It is clear that you can put an offer on a house sold subject to contract. It is also clear that there are risks involved. You should understand why you should not rush to place your offer on such properties. If you like the property and you get gazumped, you might consider submitting a higher offer, but that still does not guarantee your success at securing that particular property. Most people trying to buy houses should check if the property is being sold subject to contract first and then learn the terms of sales before choosing to buy the homes. Once you have made an offer that the seller can’t decline, start working on documentation as soon as possible.Get an Instant Quote >>