In part 1, we discussed the pros and cons of either buying first or selling first. In Part 2, we will look at how to protect yourself when you are trying to do both simultaneously. There are several options you can use in a contract to protect you when you are buying and when you are selling. Let’s look at the contingencies to use when you are the buyer of a new home.
Sale of Home Contingency
As a buyer, you can make your offer contingent upon the sale of your house. If you can’t sell your house, you can void the purchase contract with no penalty. To make this work takes a little finesse. An offer with this type of contingency is not viewed favorably by a seller. In a strong seller’s market (think back to 2005), an offer with this type of contingency would be dead on arrival. The importance of having a competent agent being able to make your case cannot be overemphasized. The seller on the other side of the transaction will want to see evidence showing why they should take their home off the market and accept yours.
Settlement of Purchaser’s Property
This is similar to the sale of home contingency but is further along in the sales process. Use this contingency when you already have your current home under contract. A seller will be more likely to accept a purchase contract when you already have your house under contract.
On the Seller side, you also have a couple options.
Contingent On Seller Purchasing Another House
This contingency will protect you as the seller from being forced out of your house with no where to go. This contingency will allow you to put your current home on the market AND get it under contract, but still have the ability to cancel the contract if things don’t work out for your next house. Obviously, you want to be careful how you use this contingency. Buyers might be a little hesitant to make an offer without some reassurance they are not wasting their time.
Post Settlement Occupancy option
If you need to sell your current place before settling on your new home, but would like a little breathing room to pack and move, consider using this option that allows to the seller to stay in the house for a short period (days or weeks, not months). The cost is usually the buyer’s pro-rated carrying costs – mortgage payment + taxes + condo fees (if applicable).
With all these contingencies and options noted above, there are more details that haven’t been discussed, such as timelines, deadlines and penalties.
This is only a quick overview of some of your options. However, everyone's situation is different. If you would like to discuss your unique situation more in-depth or just have a few questions, don't hesitate to contact us here.