So, you want to purchase a home, but you need to sell a home in order to buy the new one. When should you start looking? When should you make an offer? What if you find the perfect home, but yours has not sold? Or, what if someone who wants to buy your current house needs to sell a house first? The whole process can be overwhelming. Here are some commonly asked questions in that situation, and while there are no absolutes in any of it, there may be ways to minimize the potential problems.
Should I list my home before I start looking for my new home?
Very generally speaking, it is probably best to have your current home on the market first. That way, you know at what price you are going to list your home, and have a generalized idea what comparables have sold for, and about how long they were on the market. Once your home is on the market, and you have met with your lender regarding potential purchase prices of your new home, you could start looking at new homes, keeping in mind that you may or may not be “able” to purchase the first home you like.
Sometimes the above scenario isn’t possible. It may be that you were not really considering a move until you found an opportunity you just didn’t want to pass up. So, you are looking at trying to secure your new home before you look at the listing of your current home. This can also work out, but communication is the key. If you can get the Seller of the home you want to accept a Buy-Sell that is contingent upon your house selling, you will want to make sure you keep that Seller informed of the progress of the sale on your home.
I found the perfect home, but my house has not sold yet. What should I do?
This situation can easily happen, and does happen all the time. We usually suggest that people submit a contingent offer on the home they want to purchase. This is simply a Buy-Sell with a contingency written in stating that your current home has to sell for you to purchase the new one, and a form stating that you agree that the home will remain on the market as a “contingent sale.” Typically these are done by way of a “72 hour contingency.” This simply means that if your offer is accepted, and then another offer from another party comes in later, the Seller gives you 72 hours to determine whether you (1) can remove your contingency and purchase the home without selling your home, or (2) want to walk away from the transaction. If you cannot purchase the home without your current home selling, then the Seller may move on to the next party. There is usually an end date on the contingency sale as well, so that if your current home has not sold by that date, the Buy-Sell is null and the home goes back on the market, completely active.
Are Sellers reluctant to accept a contingency sale in the current Missoula real estate market?
Because of the past few years, and all of the listings that just sat and did not get shown, some Sellers may be pretty skeptical of accepting a contingent offer. When we are representing Sellers who receive a contingent offer, we usually require that the Buyer provide us with information on the home they are selling to include (1) the listing; (2) the listing agent’s contact information (if it is a different agent than the one they are working with on the purchase, e.g. outside of Missoula); (3) how long it has been listed; (4) how many showings have occurred; (5) any other pertinent information about the home. If the home is located in Missoula, we will actually go view the home and do our own analysis on what we think the home should be listed for to sell in today’s market. This information helps with our ability to assess how likely it is that the contingency sale completes. So, all that being said, these might be things that you offer to do and/or provide to a Seller when you make a contingent offer.
Another thing that helps in a situation like this is to get all your inspection items cleared up right away in the transaction. Even though your home has not sold, if you are willing to do your inspection and get all those items cleared up within the first 2-3 weeks (as in a typical transaction), it shows the Seller you are serious about being motivated to get this done. It shows them that you are willing to put out the money for the inspection, even though you are not sure you will be able to purchase the home.
If I get a contingency offer accepted on the home I want to purchase, does the home show up as “under contract”?
Generally, no. If a home is under contract by way of a contingency sale, it usually shows up in MLS as “Contingency Sale” and is still listed under active listings. This usually slows showings down, because some Buyers don’t want to look at a property that is not completely available, but it is still characterized as an active listing.
If I do a contingent offer and another offer comes in, am I required to actually close on the purchase of the home in 72 hours?
No, you just must release the contingency for the sale of your home, in writing, within the 72 hours. If you are somehow able to purchase the home without selling the other home, you can do this. However, if it is a financing requirement that you sell your current home before you qualify for the next home, you would not be able to release the contingency.
My current home is under contract, but I do need it to close in order to qualify for the financing on the home I want to purchase. Do I still need to do a contingent offer?
Yes, you should still write in the contingency in the Buy-Sell, stating that the closing of the home you want to purchase is contingent upon the final closing and recording of your current home. You probably do not, however, need to do the form that states that it will remain on the market listed as a “contingent sale.” This kind of sale would probably just show up in MLS as “under contract, backup offers accepted.”
What if I receive a contingent offer on my current house? Can I make an offer on another home?
This is where the process turns even more like a string of dominos. Yes, you can make an offer, but you could run into some resistance from the Sellers of the home you want to purchase. This process can get really confusing, but they can work. My best suggestion in this situation would be the things I mentioned above – provide as much information to the other parties about the other sales and see if there is a way to make it all work. These situations do happen, probably less in the current Missoula real estate market than in the past, but they are not impossible.
One thing to remember if you are making an offer on a home with a contingent Buy-Sell is that the Seller of that home is taking on a certain amount of risk that your home will not sell. And in doing that, they are listing their home as a “contingency sale”, which will slow the showings on their home. So, regardless of the stresses that occur during the negotiations, whether they be concerning price, closing date, inspection items, etc., keep that in mind.
Please contact us with any other questions regarding this situation, or any other. We would be happy to help in any way we can.