How Selling a Home Contingent on Finding Another Works
Selling a home contingent on finding another may seem like a great idea on the surface. You put your home up for sale but make it clear that you can only sell if you successfully purchase another home before the sale finalizes. Unfortunately, while this arrangement may prevent you from going homeless it can also prevent you from finding a quality buyer. Selling a home contingent on finding another can backfire quickly, making it increasingly difficult to sell your house.
You have a surprising amount of leeway in how you sell your home, at least theoretically. You can sell your home contingent on finding another property to buy. This means that if you fail to find a home for whatever reason the sale does not go through. The buyer keeps the money and you keep your home. Just because you can do something does not mean you should, however.
You could also demand that the buyer pay in hundred dollar bills or that the house remain blue for the next ten years. Unreasonable demands are likely to send buyers looking elsewhere. When you think about it, selling your house with this kind of contingency is not terribly reasonable and has no benefits for the party doing the buying. It is the exact opposite of buying a home contingent on selling the one you own which is also not usually going to fly either. Attempting to put unreasonable contingencies into real estate contracts rarely ever works.
Buying a home is not necessarily easy – something you will discover when you are scrambling to find a home so yours will sell. It takes time to locate a good property. You have to find a real estate agent you trust, determine what you can spend, what you want and then view any number of properties. When you finally find one you want you have to make and offer and hold your breath in hopes it is accepted. You then have to go over that property with a fine-tooth comb.
You will spend money on a home inspection, hiring a lawyer for a contract review, spend money on applying for a loan and more. It is difficult and emotional work that only becomes worthwhile when you finally get the home of your dreams. But a buyer who agrees to your contingency never knows if he or she has actually purchased the home if you have a clause that says the purchase is contingent on finding another home.
It takes a unique kind of individual to agree to such terms and it is easy to imagine this type of contingency working in only rare circumstances. If your home was in extremely high demand, for instance, you might be able to find someone willing to go to the trouble. However, if your home is not something truly exceptional, selling on this type of contingency will almost surely drive buyers away. When buying a home it is quite common to have due diligence period of a couple of weeks to get everything in order. As a buyer you will be spending quite a few dollars to make it happen including the following:
- Hiring a home inspector – you can expect to spend around $500-$1000 dollars depending on the inspector and all they types of inspections you do. Some of the more common inspections that take place during the home buying process include, radon, water, mold, lead paint, and a general building inspection.
- Applying for a mortgage loan – a buyer can expect to pay another few hundred dollars and maybe more on getting the mortgage application done with a lender.
- Hiring an attorney for contract review. Getting a lawyer to review the contract to purchase could be another $500-$1000 depending on the lawyer and customary charges for a particular location.
Imagine yourself in the buyer’s shoes and it becomes fairly easy to understand why this type of selling contingency is frowned upon. It makes an already stressful situation unworkable – something to avoid if you want to sell. Who in their right mind is going to want to spend money on all of these things without knowing they actually have purchased a home or not?
The cost to the buyer really only scratches the surface of why agreeing to such a contingency is completely moronic for most buyers. For the vast majority of buyers who are out looking at real estate they are probably coming from one of two scenarios. Either they have their current home under agreement or have been renting.
In both circumstances they more than likely have a deadline by which they need to find other housing. Trying to buy a home where the seller has made selling contingent on finding another property is going to be nearly impossible. Unless everything falls into place perfectly the buyer is making a huge gamble of finding themselves homeless!
Not a Good Way to Do Business
Selling your home is a business transaction. You need to think like a businessperson if you want to get the best results in this situation. Good business trades value for value – both parties feel like they benefit from the transaction and both walk away happy. The problem with selling a home contingent on finding another is that it focuses completely on your needs and ignores the needs of the buyer.
In this type of market, plenty of other sellers are willing to be more attentive and offer a win-win scenario. Realtors and the buyers they represent will naturally steer clear of your property when they perceive it to be troublesome or difficult. Even if the buyer is unaware of the challenges you are presenting as a seller, his or her Realtor will speak up long before any deal is made. All of the expenses listed above may be necessary, but they might as well go towards a relatively sure thing.
Will you be able to find a Realtor who will agree to list the home under your terms of selling contingent on finding another property. Absolutely without question you will. There are some real estate agents that won’t give a second thought about doing ANYTHING a seller asks them to as long as it’s not breaking the law. This doesn’t mean it is a smart thing to do. Far from it! A great real estate agent is going to go over all the pro’s and con’s of the “subject to selling a home contingent on finding another” clause inserted in the multiple listing service.
More than likely the agent who says nothing and just agrees to doing whatever you want doesn’t really care if your home sells or not. They are desperate for business and a way to make their phone ring. If they don’t sell your home it doesn’t matter because they are using your property as a way to get buyer leads from the internet, sign calls and other forms of real estate marketing. They can then just go and sell other homes from the additional business your listing has generated.
Bad For Your Sale
Being seen as unreasonable can have lasting damage to your listing and create somewhat of a domino effect. The more buyers and Realtors come to avoid your property the more of a stigma it will develop. It will stay on the market longer and you will gain a reputation as someone who does not really want to sell. This can result in low ball offers and sometimes no offers at all. Eventually you will have to take the listing down or sell for a price lower than what you would have gotten in more favorable circumstances.
Creating barriers to a sale is almost as bad as overpricing a home. In both circumstances you increase the odds that your home will stay on the market longer. The last thing you want as a seller is to have the number of days on the market become inflated. The longer a home remains on the market the greater the chance you will get lower offers.
You also risk the market turning on you. Housing prices fluctuate and it is possible that your listing will take long enough to sell that you become trapped. Your original asking price no longer reflects the current market and you must drop the price to remain competitive.
Focus on The Long Game
Just because you sell your home before you have bought another one does not mean you will become homeless. If you need to wait until your home sells before buying another you can still figure something out. Some sellers move in with family for a while before they find the perfect house while others rent. Homeowners – especially those that have owned for a long time – sometimes forget that renting is not the end of the world, especially if you have a long-term plan.
Buying your next house should be something you spend time on and consider carefully. Arranging for temporary living quarters can give you time to do the looking and shopping around necessary to find what you really want. You are not the only seller in this situation. Discuss your options with the Realtors you are interviewing to find out what other people in your situation have done before. Your real estate agent may have some excellent options that others have taken advantage of. You may have to act fairly quickly during the transition period but plenty have done it before. In the end you will have the home you want and you will have made the sale you needed to make. Hopefully you have come to the conclusion that selling a home contingent on finding another home is not the best way to approach buying and selling real estate!
About the author: The above Real Estate information on selling a home contingent on finding another was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at firstname.lastname@example.org or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 27+ years.
Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service Real Estate sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton and Uxbridge MA.
Other Home Selling Resources Worth Looking At
- Contingent contracts for finding another property to buy via About.com.
- Nine top home selling tips to make your home sale the best possible experience via Maximum Real Estate Exposure.