Taking a Look at the Sale Of Property (SOP) Clause & What It Means
Real Estate Sales Representative
There it is – the PERFECT home for you and your family has just come up on the market. It’s the house you’ve been dreaming of for so long – and now it’s there for the taking! Only one small problem. You haven’t sold your current home — or maybe you haven’t even put it up for sale yet! So what can you do? You definitely don’t want to be stuck with two houses & two mortgages to pay! That’s where the “Sale Of Property” clause can come in handy. As a buyer, the “SOP” might be just what you need to get the home you’re looking for without taking on a big risk. So let’s go through the 5-W’s of Sale Of Property Conditions!
WHO IS THIS FOR?
If you currently own a home, and you’re looking to put an offer on a new home, you might consider putting this clause in your offer to purchase.
WHAT IS THE SOP CLAUSE?
In your offer to purchase a home, you may wish to say “I will buy this new house ONLY if I sell my current house by a certain date.” That way you reduce the risk of being stuck with two houses at the same time. You’re essentially saying “I really want to buy your house, but you’ve got to give me a little time to sell mine first.” Here is the actual condition, written out in legal terms:
“This Offer is conditional upon the sale of the Buyer’s property known as (current address). Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than (certain time and date), that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller as aforesaid within the time period stated herein.”
I know – it is as exciting to read as a Dishwasher manual. I get it. But that’s not all the legal jargon there is. There is often an “escape clause” added as well to make your offer more appealing to sellers. (We’ll chat more about that in the “Why” section – but for now, here is the Escape Clause legal wording:
“Provided further that the Seller may continue to offer the property for sale and, in the event the Seller receives another Offer satisfactory to the Seller, the Seller may so notify the Buyer personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto. The Buyer shall have (normally 48 could be less or more) hours from the giving of such notice to waive any and all conditions by notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto, failing which this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction.”
WHEN & WHY WOULD I CONSIDER DOING THIS?
We would suggest adding the SOP clause to a buyer’s offer if they need some assurance they’ll be able to sell their current home before committing to purchasing the new one. However some buyers are willing to take a risk and NOT include this clause in order to make their offer more appealing to the sellers. It really depends on the market conditions in your area – and that’s why a Realtor is a big help in determining what risks are acceptable in your situation. You see, some sellers aren’t fond of accepting offers with the SOP clause; it means they have to wait for you to sell YOUR home before they find out if THEIR home is officially sold. Which brings me to the Escape Clause.
The Escape Clause means your seller can continue to show their house to other potential buyers. And, if another buyer comes along with a better offer than yours, you will have 48 hours to decide if you want to WALK AWAY from your purchase, or REMOVE ALL OF YOUR CONDITIONS – including the Sale of Property. You will be required to firm up on all your conditions within that 48 hours (even your financing and home inspection, etc.) so it helps if you’ve done your homework in advance! We call this situation “Getting Bumped” and it’s not fun if it happens – but it’s important that you’re aware of the potential of it happening.
WHERE DOES THIS TYPICALLY HAPPEN?
Certain price points you will see the SOP condition more – generally it’s larger family homes that have this situation, as opposed to Investment Properties or First Time Homebuyers. Typically someone is selling their first house and moving up to a bigger house. You won’t be alone and the only one offering with an SOP condition here.
So there you have it! A crash course in this useful clause and when it’s best to put it in your offer. Always check with your Realtor — we have plenty of experience in knowing when it is and isn’t a good idea to include this clause. That’s what we’re here for!