Buying a house is a major milestone in anyone’s life. It’s a big decision that requires careful planning and consideration. But what happens when you want to buy a new house, but still need to sell your current one? This is where a home sale contingency comes into play. In this article, we will discuss how to buy a house contingent on selling yours, how a home sale contingency works, timelines, risks, and tips to strengthen your offer.
A home sale contingency is a clause in a real estate contract that allows a buyer to back out of the deal if they are unable to sell their current home within a specified period of time. This contingency is put in place to protect the buyer from being stuck with two mortgages if their current home doesn’t sell in time. It also gives the buyer more time to find a suitable new home without the pressure of having to sell their current one quickly.
So, how does a home sale contingency work? Let’s say you find your dream home, but you still need to sell your current house. You can make an offer on the new house with a home sale contingency clause. This means that the sale of the new house is contingent on the sale of your current house. If your offer is accepted, you will have a certain amount of time, usually 30-60 days, to sell your current house. If you are unable to sell your house within that time frame, you can back out of the deal without any penalties.
One of the biggest risks of buying a house contingent on selling yours is that the seller may continue to market the house and accept other offers. If a better offer comes along, the seller may choose to accept it, leaving you without a home. To avoid this risk, you can include a kick-out clause in your contract. This clause allows the seller to continue marketing the house, but if you receive an offer, the seller has a certain amount of time, usually 72 hours, to either accept your offer or back out of the deal. This gives you some protection against losing the house to another buyer.
Another risk is that your current house may not sell within the specified time frame. This could leave you in a difficult situation, as you may not have the funds to purchase the new house. To mitigate this risk, you can include a financing contingency in your contract. This contingency states that the purchase of the new house is contingent on you obtaining financing. If you are unable to secure financing, you can back out of the deal without any penalties.
Now that you understand how a home sale contingency works and the risks involved, here are some tips to strengthen your offer:
1. Get pre-approved for a mortgage: Before making an offer on a new house, it’s important to get pre-approved for a mortgage. This will show the seller that you are a serious buyer and have the financial means to purchase the house.
2. Price your current house competitively: To increase the chances of selling your current house quickly, it’s important to price it competitively. This will attract more potential buyers and increase the likelihood of receiving an offer.
3. Be flexible with the closing date: If you are able to, be flexible with the closing date. This will show the seller that you are willing to work with their timeline and make the process smoother for both parties.
4. Offer a larger earnest money deposit: An earnest money deposit is a good faith deposit that shows the seller you are serious about buying the house. Offering a larger deposit can make your offer more attractive to the seller.
5. Work with a real estate agent: A real estate agent can guide you through the process of buying a house contingent on selling yours. They have experience and knowledge in negotiating these types of deals and can help you make a strong offer.
In conclusion, buying a house contingent on selling yours can be a great option for those who need to sell their current house before purchasing a new one. It gives you more time and flexibility to find your dream home without the pressure of having to sell your current one quickly. However, it’s important to understand the risks involved and take steps to strengthen your offer. By following these tips and working with a real estate agent, you can increase your chances of successfully buying a house contingent on selling yours.