How to Deal With House Sale Contingencies
If you’re past the glow of buying your first home and ready to move on up or just tired of the home you’re currently in, it might be time to sell. But selling a house while buying a home requires a little bit more finesse than just making a purchase.
Below, we’ll walk you through how long it takes to sell, what a contingency is and what you’ll need to do to make your contingency sale happen.
How long does it take to sell a home?
The “closing” period of a home begins when a seller accepts a buyer’s offer, and the deal is done when the last document is signed at the closing table.
According to Ellie Mae, the top cloud-based platform provider for the mortgage industry that processes 35 percent of mortgage applications, the average closing time on a home loan is 45 days.
Detroit area real estate agent Deborah Smith, who has 65 percent more property sales under her belt than the average agent, says it takes about 30-45 days.
So for a typical home sale, you’re looking at somewhere between 30-45 days, but when there are contingencies involved, the sale gets more complicated.
How does a contingency work?
If you’re like more than half of homebuyers, you’re purchasing your second, third, fourth, etc., home.
Buying a house contingent on selling yours means that you’re buying only in the case that your current home sells. It’s a bit trickier than just buying a home outright, so you’ll want to be sure to find a trusted and experienced real estate agent to help you through the transaction.
Your agent will take care of adding the contingency clause to your home offer. Contingencies protect buyers from the burden of carrying two mortgages.
They can happen in three ways:
- You find a buyer for your home. Your contract for the new home moves forward.
- You don’t find a homebuyer in the time frame specified, which is usually 30-60 days), the offer and contract for buying a new home is voided. Buyers may return any money sellers put in. You start a whole new home-search process.
- The sellers put a kick-out clause (an addendum) in the contract. Sellers can keep their home on the market, and if they find a new buyer while you’re trying to sell your home, they’ll give you 72 hours to continue the contract or drop out so they can accept a different offer, according to R.C. Shea and Associates.
As mentioned before, about 70 percent of homebuyers are not buying their first home, which means that buyers, sellers and agents are very familiar with how this process works.
What to focus on
There are four typical scenarios that come from this type of sale:
Your home is under contract, and you’re looking for your next dream home.
Your current home should be packed up and ready to put in storage or move. Finding a new home is the top priority. Start by narrowing down your dream neighborhood. Make a list of must-haves when it comes to a new community, and draw up a profile of an ideal neighborhood. Think about the following:
- Cost of taxes
- Urban, suburban or rural?
- Proximity to work, school, church, etc.
- Access to public transportation
- Age of neighborhood.
Your home is on the market, and you’re looking for your next dream home.
Since 2012, mortgage rates have been low, but they are starting to rise, pushing some would-be buyers off the fence into homeownership.
Depending on where you live, you might be in the midst of a seller’s market or coming off of one. As a buyer, you are going to have to make sure your offer is attractive enough to compete, and as a seller, you’re going to have to do what you can to make your house attractive to wide array of potential buyers.
If your home goes on the market first, go back to step 1. If you find your dream home first, move on to step 3.
Your home is on the market, and you’ve found your next dream home.
If this is the case for you, you’ll have to focus on both selling your home and preparing the best offer on another home. Don’t let any obstacles get in the way of selling your home.
- Use your real estate agent’s advice on pricing your home right for your market.
- Make all repairs on things that’ll cause buyers to hesitate.
- Don’t skimp on staging.
- Only use high-quality images.
- Prepare to move quickly.
Then you’ll need to focus on that offer for the new house. Here’s how you do it:
- Offer a higher price than your competitor.
- Let the seller stay a little longer.
- Think about using a bridge loan (a short-term loan buyers can take out against their current home to help finance the new home before selling their property).
- Include the list price with the offer.
- Make it personal with a handwritten, personal note about why this home is a dream for your family.
Your home isn’t on the market, and you’ve found your next dream home.
Get your home on the market, and then go back to step 3.
At the end of the day
At the end of the day, selling a home with a contingency can seem stressful, but with the right real estate agent and escrow company in your corner, you’ll be at the closing table and collecting your check before you know it. All you have to do is find the best agent for you and follow his or her advice, and you’ll be moving into your new dream house in no time at all.
About the Author: Dani Vanderboegh is a senior editor for Inman, a leading news source for real estate agents and brokers. She has a master’s degree in editing from the Missouri School of Journalism.