Wednesday, December 04, 2019 / by Elizabeth Sorensen
So, you're selling your home and you’ve gotten an offer but it’s contingent on the sale of the buyer’s home. What does that really mean for you?
Since the housing crash in 2008 our Spokane real estate market has slowly gotten stronger and stronger, which is allowing current home owners to look at purchasing their next home. Many of these buyers have equity in the home they own but need that equity to purchase their next home. This is where the home contingency comes into play. In Washington, there are two types of sale contingencies that can be used when a buyer needs to sell their current home before they can buy their next home.
Home Sale Contingency
The first is contingent upon on an accepted offer for the buyers property. This means the buyer may or may not currently have their home on the market to sell but in either case the buyer does NOT currently have an accepted offer for their home. This means that the buyer needs to get an acceptable contract for their home and close on it before they can purchase the home they would like to buy.
With this contingency there are some critical terms to consider as you contemplate taking an offer like this.
~Where is the home located?
~Is the home currently on the market, if so how long has it been on the market?
~Is the home competitively priced & move-in ready?
~How quickly are the homes in the area selling?
~Negotiate how many days the buyer has to get their home listed on the market if not already listed
And so many more…
Understanding the "Bump Clause"
The question I have gotten from sellers about this specific contingency is “what if I accept this offer and then get another offer that is not contingent?”
With this contingency, if you get another offer you would like to take prior to your current buyer getting an offer on their home, you must give the current buyer with the contingency the first right to move forward with the purchase, which would mean they would have to remove this contingency. If the current buyer is unable to do this the seller may “bump” that first buyer and cancel the contract. That buyer would then get their earnest money back.
It is critical that your agent negotiate a short bump period during the negotiation of the offer to protect you in this scenario.
Pending Sale Contingency
The second sale contingency is contingent upon the “pending sale” of the buyer’s property. This is when the buyer already has an accepted contract for their home- it just has to close before the buyer can close on your home.
~Has the inspection period & appraisal been completed?
~Have they gotten through loan underwriting?
~Does the buyer have any unmet loan conditions?
~When is the closing date of their home?
~What contingencies does the buyer for their home have in the contract?
Just to name a few…
Make sure your agent goes through the contract for the sale of your buyer's home and understands what contingencies and risks are involved so you can make an educated decision.
Because so many buyers today need the equity from their home to purchase their next home, accepting an offer with a contingency is not all bad as long as you have the answers to these critical questions and concerns. There are many, many points to consider and negotiate with either contingency and having a real estate broker advocating on your behalf and who can navigate through the details of each situation is going to set you up for the highest success of the offer making it to the closing table.
As always, if you have any real estate related questions or if I can help with anything, please give me a call.
Haven Real Estate Group