A purchase agreement can be made conditional in connection with a home sale. There can be both benefits and downsides attached to this type of agreement.
In this blog, we will dive into conditional purchase agreements – what they are, what rules relate to them, their advantages, and disadvantages, and much more.
In other words, you will be introduced to everything worth knowing about conditional purchase agreements so that you can make an informed decision.
Read on for answers to your questions on this topic.
What is a conditional purchase agreement?
For every property deal, a purchase agreement is entered into between the home buyer and the home seller. This agreement lays down and defines the conditions for the purchase including the price, payment, deadlines and so on.
A conditional purchase agreement is different from a normal purchase agreement because it is conditional.
The agreement is conditional upon the buyer being able to sell their current home within a given period. This detail can vary from agreement to agreement but will typically be between 30 and 180 days, that is, between 1 and 6 months.
What does it mean to make a conditional purchase agreement?
When you, as a home buyer, commit to a conditional purchase agreement, the purchase will only be finalised if you sell your current home within the timeframe that has been agreed between you and the seller.
An old but still relevant piece of advice is that you should sell before you buy. It can, however – for various reasons – be difficult to follow this advice for many people in Denmark. In some cases, you may feel it necessary to buy a new home before you have managed to sell your current home.
In such cases, entering into a conditional purchase agreement is an obvious move. Such an agreement means that you don’t risk paying the costs of two properties, just as you no longer must worry about being without a roof over your head for a time. We’ll return to the advantages (as well as the downsides) later in this blog.
What rules apply to a conditional purchase agreement?
There are rules for all purchase agreements in property deals. Conditional purchase agreements are no exception.
As a home buyer, it is a very good idea to familiarise yourself with the applicable rules before you take the first step in connection with a property deal.
Among other things, you must be familiar with the following rules:
- A conditional purchase agreement is generally binding (except for the agreed reservations).
- A statutory right of withdrawal of 6 working days from the signing of the purchase agreement applies (compensation must be paid to the seller, however, of 1% of the sales price upon withdrawal).
- As a starting point, the home seller has the opportunity to sell the home to another party if another purchase offer emerges – e.g. if a higher and / or lower bid is received with another takeover day.
- Once a conditional sale agreement has been entered into, it can only be changed if both the buyer and seller agree to this change.
- The real estate agent may only demand a payment of DKK 25,000 until the reservation about own sale is waived.
For more information about the rules in the area, please contact us by phone or email. We are also happy to tell you more about the differences between conditional and unconditional purchase agreements.
Advantages and disadvantages of a conditional purchase agreement for the home buyer
There are advantages and disadvantages to a conditional purchase agreement for both buyer and seller. In this section, we will focus on the advantages and disadvantages that concern home buyers.
Advantages:
- You avoid having to pay the costs of keeping two homes simultaneously.
- You avoid being left without a home to live in for a period.
- You can be released from the agreement if – despite your expectations – you don’t manage to sell your home within the agreed timeframe.
- In general, you can buy the home for the price you agreed on, even if house prices rise.
- You can generally come with a counteroffer should another buyer show an interest in the home and put in an offer (you get the right of first refusal).
- All details regarding price, payment, handover date and anything else are agreed on the spot, and the sale can therefore go through quickly when/if you sell your current home.
Disadvantages:
- You risk the home you want getting sold to another buyer.
- You risk market prices dropping during the period, which means you will pay an overprice for the home.
- The seller has a golden opportunity to push the price up if there are several interested buyers.
- You are legally obliged by the conditional purchase agreement during the agreement period. As a buyer you therefore don’t have the opportunity to buy another home during this period
- The home will still be for sale online and will be showcased to other potential buyers
Get help from a professional buyer’s agent
Now that you’re familiar with both the advantages and disadvantages of entering into a conditional purchase agreement. It should be easier for you to assess whether this type of purchase agreement is relevant to you.
If you decide that a conditional purchase agreement could be a good solution for your personal situation, you may need some assistance with the practical and legal work that is involved in entering into a conditional purchase agreement. We’re happy to give you this helping hand so that you can enter into an agreement that accommodates your needs as a home buyer.
Professional buyer counseling
You should always make use of buyer counselling when purchasing a home. At Minkøbermægler.dk, we look after your interests throughout the entire buying process as your personal adviser. Contact us today to learn more about how we can help you get through your real estate purchase safely.
Note, the real estate agent is hired by the seller and represents the seller’s interests throughout the whole process, while the buyer’s agent exclusively represents the interests of the buyer.
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