With the current downturn in the housing market, sellers are getting desperate and looking for new ways to sell their houses. The latest solution? "Subject to Sale" transactions. But could this spell the start of chain sales here in Australia?
"Subject-to-Sale" is a sales system where a buyer makes an offer on a house and will pay for it, provided they sell their own house first. It's not that uncommon in regional areas of Australia and is almost the norm in the UK, however up until recently it had been 20 years since it had been seen in city areas.
The advantages to "Subject-to-Sale" agreements almost all rest with the buyer, who essentially has a get out of gaol free card in the case that their house doesn't sell. However desperate situations call for desperate measures, and in the case of the falling Australian housing market, many sellers are starting to feel concerned.
And they have cause to be worried, as some real estate analysts estimate that property prices (already dropping) could fall by as much as 60% over the next five years.
However are "Subject-to-Sale" sales a solution? Or are they likely to cause even more problems in an already troubled market?
In the UK, the "subject-to-sale" system has transformed into a beast all of its own, where "chains" of people waiting to sell their property before buying the next can become enormous, and realestate agents charge massive fees while trying to manage a chain of sales that can often hinge on just one person raising enough funds on a specific day.
It's a tough call, and with many sellers feeling caught in a catch 22 as they seek to sell for the price they want, but have to wait it out (all the while paying advertising and real estate agent fees) before a high enough offer arrives, it's no surprise that they're looking for other options.
Are "Subject-to-Sale" transactions a valid option for Australian sellers? Or will it spell a troubled future of "chain" sales that rapidly spiral out of control?