Homeowners on the move understand the sale of their old home will not align perfectly with the purchase of their new home. They prepare for a stretch of homelessness or a period of double mortgages. “Homeless” clients usually get by with the help of storage units and temporary accommodations (i.e. short term rental or the in-law’s basement). But those facing the prospect of managing and financing two homes, for an unknown period of time, seek alternatives.
If you find the perfect new home before selling your current house, you may consider submitting a purchase offer with a home sale contingency. A home sale contingency offer is a written purchase agreement dependent upon your ability to sell your current home. If you don’t sell your home within the specified time, which is usually 30 to 60 days, the purchase offer will be void.
Sounds like a good idea for a buyer, but as a seller, why in the world would you ever agree to this?
The seller’s willingness to accept a contingent offer depends on many factors, but here are a few key considerations:
- How long has the seller’s home been on the market? If it’s only been a few days or weeks, they may hold out for a non-contingent offer. The average number of days a house is on the market is 32. If they are getting close to that number or over…it’s worth exploring a contingent offer.
- What are the current market conditions? Contingency offers are less common in a seller’s market, meaning demand for housing is greater than the supply. In a buyer’s market, sellers are more willing to make concessions to get their house sold.
- What is the seller’s incentive to accept? Buyers need to understand the seller is taking a risk by removing their home from the “available” market and there’s a premium that needs to be offered for the seller to take this risk. That premium can be a higher offer price, additional earnest money/non-refundable earnest money, etc. Sellers should receive a sweet incentive to accept.
- Will accepting the offer impact the seller’s ability to move to their next home? If the seller has their new house all lined up and wants to sell ASAP, they may not have time to wait for you to sell yours.
Keep in mind, while the home is still available to be seen by other buyers, agents typically caution buyers against seeing a home with a pending offer because it has a lower probability of coming back on the market. Also, most contingent agreements contain a kick-out clause: If the seller receives a non-contingent offer during the time period, the buyer typically has a day or two to decide if they want to update the offer or lose the home.
Regardless if you are a buyer or a seller, a contingent offer can be a good option in the right circumstance. You need the advice and guidance of the right partner by your side to evaluate the pros and cons for your situation. Give The Garatoni Group a call at 612-821-7456 and we’ll walk you through all the options.