A homeowner looking to buy a new home while still in the middle of selling his current home should seriously consider a home sale contingency. This practice allows the homeowner a degree of protection as the sale of the new home becomes dependent on the sale of the current home. However, there are many things to consider before getting into a home sale contingency.
Types of Home Sale Contingencies
There are two types of home sale contingencies to choose from:
- Settlement Contingency
This is used when the buyer has marketed his current property, has a contract in hand, and has a settlement date. This prohibits the sellers from accepting other offers for a period of time that both parties have agreed upon. During this time, the buyer must sell his current property by the settlement date for the contract to be valid. If he fails to close, the seller will be free to terminate the contract.
- Sale and Settlement Contingency
This agreement depends on both the sale and settlement of the buyer’s current property. What differentiates this agreement is that the seller of the new property is still free to accept other offers. When this occurs, the buyer has the right of first refusal, which means he has to remove the sale and settlement contingency within 24-48 hours if the seller is about to accept another offer.
How to successfully close a home sale contingency
The best benefit a home sale contingency gives to a buyer is time to sell the existing property. This lets the buyer avoid becoming the owner of two homes and two mortgages at the same time. And by locking up a new property, the buyer does not need to expend his energy looking for a new home while trying to sell the current property.
This way, the buyer can have a seamless transition from one home to another. However, buyers who opt to use a home sale contingency should bear in mind that the set up can be risky for sellers.
To ensure the success of a home sale contingency, buyers should opt to do the following:
- Indicate if the property is already listed
Sellers will be more confident with the arrangement if the buyer’s current property is already on the market. If it is listed, the buyer should list the brokerage, the multiple listing services and the MLS number.
- Indicate how long the property has been on the market
Sellers will get a better sense of whether or not the buyer’s existing property can be sold by the proposed settlement date.
- Limit the selling date to one to four weeks
This gives incentive for the buyer to close the sale on the current property while preventing the seller from losing time in case the sale does not go through.
- Indicate the possible closing date correctly
This is recommended especially if the property is not in escrow. Buyers have the option to specify a date on the contingency agreement different from the scheduled closing date. If the property is not sold on the date, the seller can cancel the agreement to buy.
A home sale contingency is a good strategy to take for buyers who want to sell their current home while being on the lookout for a new home. And with an expert real estate agent, this can be achieved without any hassle or issues. Give me a call (or a text) at at 760 622 5087 or send me an e-mail today.