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There are many parts of an offer a property seller must consider and one of them relates to a home sale contingency clause. Let’s look at the situation from both the buyers and sellers perspective.
Home Sale Contingencies For a Homeowner Trying to Sell.
Our contract allows a buyer who is making an offer on your home add a clause related to the sale of his current property. The options for this clause can be:
- Your buyer has a home to sell but he has a contract on his home with a closing date. He may be at various stages, es early as a contract just accepted or as late as closing is scheduled and that’s all that needs to happen to release his funds. Depending on the stage he is at will determine the risk for a seller. This is a home closing contingency.
- Your buyer has a home to sell but has done nothing towards that. He agrees on his offer to put his home up for sale within 5 days of you accepting his offer. You have no control over who he hires, but it must be stated in the contract. Also he must give a timeframe he expects to get an accepted offer. You have no control over his pricing or preparation of his hoe. A typical amount of time to allow him to sell would be 60-90 days in our market. Once that time is agreed upon, you must wait it out. This is a home sale contingency.
- Your home buyer has a home to sell and is on the market with no offers yet. Also a home sale contingency.
Sellers Need to Consider the Pros and Cons of Each Contingency.
How does each type of contingency relate to your plan?
Are you moving up a chain of home sales and you too are under the gun on a home sale contingency for your purchase? It might not be a good idea to allow a home sale contingency for your sale. It could become an easily broken chain of your purchase and sale. Or do you have nowhere to go yet and want the time it will give you to start your home search and even relocation? A home closing contingency is less risky if there is a chain of sales as it’s likely going to be much faster before you know if everything plays out according to the plan.
Home closings do fail, not often but they do. People lose jobs and their finance is withdrawn, a buyer may pass away, a house may burn down, a buyer might default. Factor this risk into your decision and how it relates to your plans.
The marketing of your property can continue but the reality is you are unlikely to get back up offers unless the real estate market is extremely biased to sellers. (Rare in Midwest). One advantage is the security of a buyer at a price that was acceptable to you. At the end of the time allowed for your buyer to sell his home either can withdraw or both agree to extend. If a seller is on no rush, it’s peace of mind. You’ll need the guidance of your real estate professional to tell you how long this continue. Market knowledge is a must.
Accepting a home sale or closing contingency does expand your buyer pool. Also consider your buyers situation, he is expecting to close on his new home on the date on the contract, you have nowhere to go. He’s fulfilled his home sale and closed it, you are compelled now to move out and close the sale. You must now find alternate accommodation.
Home Sale Contingencies for a Home Buyer.
You fall in love with a house, you want to buy it but you’ve got to free your funds from your existing property. You may make an offer subject to you selling your home but this loads the pressure on you now to get cracking on your sale. Is your home ready for market or is this going to be a rush job. The pressure is on. Our contracts allow for this but state your home must be on the market in 5 business days.
Let’s assume your seller agrees to the home sale contingency.
You need to prepare your home, consider it’s condition and it’s occupants. You need to pick a REALTOR® and it does not have to be the one you are working with for your purchase. This is common if you are moving out of area. You have to select a price to sell your home in the timeframe that you wanted, let’s say 60 days. Are you going to need to be aggressive on your price? Is 60 days realistic? Did you find out before making the offer? What is the market like where you are buying? What happens after 60 days? Will the seller give you more time.
The Bump Out Clause
Did you know there is one? Here in Illinois our contracts allow for an existing contract to be bumped out in favor of a new one after a time written in the contract, usually 24, 48 or 72 hours? There are specific conditions and it can get complex, so I am not going to elaborate here. Just make sure you understand what a seller may be able to do if he gets another offer on his home.
Keep in mind that you’ll be investing time and money into your purchase with no guarantee that it will move forward. You will be required to have your home inspections. You’ll need to engage the services of an attorney to start the review process and work on getting you clear title to buy. You’ll likely being engaging the series of a loan officer or mortgage banker. What about their fees? You may have to pay for your appraisal. Consider your financial risk in a dollar amount!
A Home Sale Contingency is Not Common
With all the complexities of home sale contingencies and even the risk of home closing contingencies, it’s not surprising they are not well liked here in Northern Illinois. As a buyer you should seek guidance from an experienced buyers agent. You might be better served to look for a stop gap way of selling, moving into temporary accommodation, and then buying with a stronger situation to present to a seller.
Most sellers will shy away from offers that are contingent upon a home sale. They just don’t like to put their plans on hold or run the risk of losing 60-90 days on market. Hoe closing contingencies are more acceptable but sellers prefer them once they are past inspections and attorney reviews; even more if they are past a finance contingency.
Should I Allow a Home Sale Contingency?
No-one can tell you whether you should or should not. The decision is yours. What you need is a full understanding of any offer you receive and the guidance of a well versed and experienced REALTOR® who can explain the entire contract and can give you the experienced guidance you need to make a decision.
If you are thinking of selling a home in the NW Suburbs of Chicago son, let us know, we are here to help. Fill in our form or give Corinne a call at 847-363-3686.