When it comes to buying or selling a property, an on-sell contract can be a useful tool for ensuring that both parties are on the same page. In this article, we`ll take a closer look at what an on-sell contract is and how it works.
First off, what is an on-sell contract? It is a type of agreement that allows the buyer of a property to sell it on to a third party before the settlement date. This can be particularly useful in situations where the buyer is purchasing a property for investment purposes or plans to sell it on for a profit.
The purpose of an on-sell contract is to provide clarity around the terms and conditions of the sale. This can include things like the purchase price, settlement date, and any special conditions that may apply. By having everything agreed upon in writing, both the buyer and the subsequent seller can avoid misunderstandings and disputes down the track.
One common scenario where an on-sell contract may be used is in the case of a property development. For example, a developer may purchase a piece of land with the intention of building a multi-unit complex. They may then sell individual units off the plan to buyers before the project is complete.
In this situation, the developer would use an on-sell contract to outline the terms of the sale between themselves and the individual buyer. This could include the price of the unit, the expected completion date, and any conditions around the sale (such as the requirement for the buyer to obtain finance or for the developer to complete certain works before settlement).
It`s important to note that an on-sell contract is not without its risks. For example, if the initial buyer is unable to find a subsequent purchaser for the property, they may still be bound to complete the sale themselves. Additionally, if the subsequent sale falls through, the initial buyer may be left with a property that they didn`t originally intend to hold onto.
To manage these risks, it`s important to work with experienced legal and financial professionals who can help to structure the transaction in a way that minimizes potential pitfalls.
Overall, an on-sell contract can be a useful tool for buyers and sellers alike, particularly in situations where the property is being purchased for investment purposes. However, it`s important to be aware of the potential risks and to seek professional advice to ensure a smooth and successful transaction.