Studies show that as the economy grows, so does the rate of mortgages. According to the home buying institute, the 30-year mortgage rates will increase by up to 4.4% by the end of the year. Moving from one home to the other can set you into a financial crisis as you try to navigate through two mortgages.
However, with the introduction of a contingent, you can relax and place your bets comfortably. A house contingent helps to keep the house buying deal open with realtor finding a balance. Their task includes knowing how to buy a house contingent on selling yours.
If your family has outgrown the current dream house, moving to a new one is a wise move. Therefore, if you get a competitive contingent offer, it will make the buying and selling process easy. If you are new to the term, you need to understand what a contingency means and its significance in real estate.
What Does Contingent Mean?
Buying a house contingent on selling yours means that you will only buy a house after your current home sells. In this case, your realtor will add the home offer in the contingency clause. The main objective of contingencies is to ensure buyers are protected from paying two mortgages.
When signing the contingency agreement, it is essential to note that it works in three ways:
• Your contract for the new home goes forward only if you find a buyer for your current home
• If you don’t find a buyer with the specified timeframe, the buying contract of the new home becomes void. In such cases, buyers should return money that sellers put in before starting a new house search afresh.
• Sellers can put a kick-out clause into the contract. This clause guarantees that if a seller finds a new buyer and you are yet to find a buyer for your house, they give you 72 hours to either continue or drop out of the contract.
Understand the Contract Details of Buying Contingent on Selling
Contingent real estate has different contract details depending on house size and location. Therefore, before you settle and sign any contract ensure you understand the agreement first. Understanding the agreement helps you know what to expect.
Additionally, it gives you an overview of what happens when you accept an offer and how much time you have before buying another. It also helps you plan on effective ways of selling your house upon buying another.
You also get to know what the meaning of contingent is in real estate and its effects on your buying or selling process.
Considerations for Buyers
It is quite common for people to sell their current home when looking for a better one. Contingent real estate gives you the time you need to sell one home and settle before getting another. It also guarantees that as a buyer, you don’t possess two homes within the same time, hence saves you from paying two mortgages.
Another benefit of contingent real estate is that it offers you peace of mind through the entire process of selling and buying. In the deal, the new home is locked in to ensure that immediately your current home sells, you are comfortable to move in the new one.
However, the deal also has some downsides. As a buyer, you need to pay for appraisal fees, bank fees, home inspections, and other expenses involved in the process if the property does not sell within the stipulated timeframe.
Considerations for a Seller
Sale contingency is a risky process as there is no guarantee that the house will sell. Although the contract allows you to keep marketing the house and accept offers, if it’s listed under contract, it becomes less attractive.
Potential buyers are not willing to fall in love with a home under contract. This is because it might take long before clearing the house or it may not be possible to buy it at all.
Therefore, before agreeing to a home sale contingency, the seller should investigate the buyer’s current home to determine:
• The average time for the sale of neighboring homes on the market: If it takes an average time of 30 and so days, there are chances of selling the home. However, it if takes 90 or more days on average before selling, there are minimal chances that your house will sell.
• Is the house on the market or not: If it’s not on the market yet, it only indicates that the buyer is thinking or buying or selling but they have not yet made the commitment.
• If the property is on the market, how long has it been there? If it has been on sale for too long, there are higher chances that it is over-priced. Another reason might be the showing procedure or simply the market is a little dry.
• Is the house priced correctly? A Realtor agent will compare different houses with the same features to see whether it has the correct price tag.
However, regardless of how long your house has been on the market, signing a house contingent contract offers you some assurance that your home will sell. With the addition of the kick-out clause, the seller gets an advantage over the buyer.
Get a Settlement Date
It is difficult to sell and buy a house at the same time. It is also very challenging to buy first then sell later. Therefore, it is essential that you make short-term arrangements that will allow you to sell first then buy a new home later.
In other words, before starting to make plans on buying, focus on getting a date for the settlement. With a date set, the offer will have less risk.
How to Buy a House Contingent on Selling Yours
A good contingent real estate contract offers you protection from any possible financial risks of having two mortgages to pay. However, with all the benefits of signing the contingency contract, it is essential to note that these contracts are legally binding.
Therefore, before committing to any, ensure you understand all the terms perfectly. If you do not know how to buy a house contingent on selling yours, you need the services of a qualified and experienced agent.
Rather than go through the process alone, contact us for professional assistance in setting a contingency contract as well as any real estate services you may need.
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