The Home Sale Contingency – Wanting to Buy and needing to Sell

Home sale contingencies are a reality for many homebuyers across the country.  Considering that a house is most people’s largest investment, it stands to reason that qualifying to purchase what is likely a bigger and more expensive investment, while holding onto your current property, is just out of reach for many people making moderate incomes.  There’s also the stress of potentially qualifying on paper for two homes but worrying about carrying two mortgages for the short term.  Thus, the home sale contingency.

In many areas of the country, home sale contingencies are the norm.  In fast moving markets with affluent areas and high-income consumers, home sale contingencies can be less attractive.  It doesn’t have to be that way though.  I’m all for being a realist, and, having lived in the DC Metro area my whole life, I understand the dynamics at play for sellers who do not want to risk taking their home off the market for a buyer who still has a home to sell.  However, in a shifting market, home sale contingencies may become more of a reality.

In Virginia and DC, a home sale contingency is an addendum to the sales contract.  Essentially, a buyer, as part of their offer to a Seller, checks a box that says they have “X” number of days to sell their home located at “X”, that they will list their home within “X” number of days after ratifying a contract on the home they want to purchase, and that they will not list the home for more than “X”.  All these parameters give the Seller and the listing agent an opportunity to fully understand what needs to be sold.  A good listing agent then will run comps and look at the market for the property that needs to be sold.  Are homes selling quickly?  Is the list price reasonable?  What does the marketing package look like for the agent that will be listing the home? These are all important variables for a Seller to consider when contemplating whether to take an offer that comes with a home sale contingency.

Last year, I was able to successfully help a handful of clients utilize the home sale contingency and still get the house they wanted.  At one point in the process with one listing agent, I was told “I don’t know any Seller that will take a home sale contingency.  Not anyone.”  Well, we did.  In fact, we found a few.  It doesn’t always work and sometimes takes a lot of patience, but if you feel most comfortable, as a consumer, retaining that protection in your contract, then hire someone who has a track record of success.  And, there does come a time in the search when you may have to reconsider the approach.  If you HAVE to sell prior to purchasing and you keep missing opportunities, here are some ideas to consider:

1)      Get your current house on the market first, and then go house hunting.  If you get a contract on your current house prior to finding your next home, negotiate a rentback with the Purchaser of your current home or, worst case, you can find temporary month to month housing that might seem like a hassle at first but will ultimately give you the freedom to compete on your dream home or snag a great deal on a house, without the weight of a home sale contingency attached.

 

2)      Search for listings that have been on the market for over 30 days.  Sellers in this position may be more willing to consider a home sale contingency to finally get their home sold.

 

3)      Search for listings that need work and again, you might find yourself a Seller who is wiling to take the risk of the home sale contingency in order to sell.

 

4)      Sweeten the pot with an offer that might be stronger on price or other terms than you might offer if you did not have a home sale contingency.  It’s typically hard to retain the protection of a home sale contingency AND still get the deal of the century.  Like any negotiation, there are some compromises.

 

5)      Finally, if you are not comfortable listing your current home before finding your next home, you can at least get a leg up on the process by having all the marketing (photos, Matterport, and writeups) prepared for your current home before you start looking at new homes.  If a seller will accept a home sale contingency, you already have everything you need to get your house listed ASAP, with maybe a day or two of cleaning in between.

 

If you qualify to carry two mortgages based on your income or debt but need the proceeds from the first sale in order to bring your down payment to your next purchase, there are financing options and bridge loans that can help make this possible.  Anything is achievable with proper planning.  Like almost every purchase, it helps to talk with a lender who can present various financing options and an agent who can help you structure a game plan, as early in the process as possible.  The truth is, Real Estate can happen on a whim and I know this from personal experience .  My husband and I have been able to purchase two homes while retaining home sale contingencies and, although imperfect at times during the home search, we ultimately found success.

[MM1]

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