When deciding to sell your home, it’s often with the goal of investing in your next one. But is it possible to purchase the new property before selling your current one? The answer is yes — there are solutions available.
Signing a forward sale agreement allows both parties to commit to buying/selling a property at a later date. A deposit — usually 10% of the sale price — is placed with the notary as a form of security.
The remainder of the payment and the official transfer of ownership take place at a later time, on a date agreed upon by both parties (often between 1 and 12 months). This allows the buyer to sell their current home during this period.
However, be mindful of the financial consequences if you’re unable to sell your current home and therefore can’t fund the new purchase. In the event of non-fulfilment of contractual obligations by either party, penalties — often equal to the deposit — may apply.
It is also possible to include a condition precedent in the sale agreement stating that the sale will only proceed if your current property is sold. In this case, the sale would take the form of a conditional forward sale or a conditional promise to sell. However, sellers are generally reluctant to accept such clauses.
Excerpt from our guide: Selling Your Home in 42 Questions