Home Sale Contingencies

If you're a homeowner who is buying your next home, a home sale contingency should be on the list of things to add to the paperwork associated with buying a new home and selling your old one. Not having a home sale contingency can damage your finances and even endanger your home ownership.

Basically, a home sale contingency is an agreement that no legal transfer of mortgage debt will be conducted while you are still trying to sell your old residence. It gives you time to obtain what you need to conclude your purchase of the new home. Most importantly, perhaps, it prevents you from having to shoulder two mortgages.

As advantageous as this can be for a home buyer, to the seller, it can be a black mark against you. The seller wants to sell their house; not wait for you, the buyer to determine whether you can buy. They don't want to sign a contract that will allow you to slip out of the deal, penalty-free, while they miss out on other offers. Usually, they don't know anything about you, other than that you're in the market for a house (providing you sell your old one), so they have no way of knowing whether you're serious or not about their property.

Sooo... is there a middle ground?

A slow market can mean that sellers are more open to an offer with a home sale contingency attached to it. Having a realtor who knows the market and the trends can be invaluable at this point, since you will be in a better position to bargain.

Showing the seller proof that your present property is likely to sell soon might also help your cause. Treat this as if you were trying to sell the house to the person you're hoping to buy from; show them pictures and information about the house and how market trends are in your favor. Show proof that other homes in the neighborhood have sold easily and for around the price you're asking. If your house is in a good neighborhood or next to a top-rated school, let the sellers know. Since they're going through the home-selling process themselves, they will likely appreciate what you're telling them about the likelihood of your house being sold quickly.

You can modify the home sale contingency into a delay of sale (promising that you will buy the house even if you haven't sold your own) and obtain a bridge loan. A bridge loan is a loan that you get to cover possible expenses (such as a second mortgage) while you wait for your house to sell. The great thing about a loan like this is that, while it can pay for your expenses, it also can help reassure a seller that you will end up buying the house, even if you don't sell your own by the end of the date indicated in the home sale contingency. If you don't need to use it, you promptly pay the loan back and move in to your new home.

Avoiding the whole home sale contingency by negotiating a long-term/flexible closing date that will allow you to house-hunt while still living in your old home is probably the better choice, if you can manage it. Get the advice of a real estate professional concerning the best way to market your home while you hunt for your next property.

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