Let’s face it, we rarely buy our next home and sell our current one at the same time. In fact, the need to temporarily house our household in transit is one of the major reasons that self-storage thrives.
But for those brave homeowners who wish to forego the cost and inconvenience of making two moves instead of one, a synchronized contingency sale can be worth the acid indigestion.
Let’s look closer at the dynamics of buying and selling a home simultaneously, and how to increase your chances of success.
What is a Contingency Sale?
A contingency sale requires agreement by your home’s buyer to meet several criteria designed by you, the seller, to synchronize the closing of your former and future residences. Criteria listed under a sale contingency typically center around completing specific steps that most often delay closings. These steps typically include home inspection, appraisal and mortgage approval.
Under the contingency contract, should any of the listed sale contingencies pose an unacceptable delay in the planned simultaneous closing, you are at liberty to cancel the sale.
It’s also important to include a contingency clause in the contract for the home you’ve chosen to buy that makes your offer contingent on your ability to sell your own home. That way, you have an out if circumstances with your buyer prevent you from selling your home as scheduled.
All About Pricing
Pricing your real estate correctly is key to making a simultaneous home sale, according to Stephanie Creeger, operations manager for The Penrose Team at RE/MAX Excalibur in Scottsdale, AZ.
“First, our Realtor ‘comps’ the property that the buyers are selling, if it is not already under contract, to make sure that it is appropriately priced for the neighborhood and it’s not going to sit on the market for a long time,” she says. “We do the due diligence on what the average days on market is for a (similar) house and comp it out to make sure that it’s priced properly to sell. Both houses will sell if both houses are priced right.”
The Secrets of Simultaneous Success
You could receive an acceptable offer on your current home and discover your dream home in the same week. But the odds of closing both sales simultaneously without having to rent storage space, pay double mortgages and/or sleep in your car are extremely slim.
With a contingency sale, you can avoid the expense to temporarily house your family and your stuff, and the inconvenience of having to move more than once.
However some home sellers might not entertain a contingent offer. Because your purchase of their property is dependent upon the sale of your house, they are taking a risk that your home sells within a desirable time frame. Be aware this might limit the homes you are able to buy. And you might need to be prepared to lose your earnest money deposit if things don’t work out.
Having a home sale contingency may also turn off some home buyers. Not everyone is willing to wait for your home purchase to close. You might find that you need to adjust the asking price of your home to take this into account to make it worth their while.
But a home sale contingency still might be the best way for you to seamlessly transition from one property to the next. Not surprisingly, teamwork is essential to making a simultaneous buy-sell scenario click.
Here are seven key ways to getting your team in synch:
1. Streamline with Experience
The ability to orchestrate simultaneous buy-sell closings hardly comes naturally. After all, buying and selling real estate are both highly competitive individual exercises. While you can attempt a simultaneous sale by yourself or with a newbie real estate agent, your chance of success is far greater if you work with a Realtor and real estate company experienced in the mechanics of contingency sales.
You can gain even more if you use the same experienced agent to both sell your current home and find your next one. This win-win scenario can greatly streamline and synchronize both transactions.
2. Do Your Homework
You’ll want to get on the same page with your agent regarding the mechanics of contingency sales. Some, but not all states, have very specific laws that govern this ambitious real estate tactic. It’s key to research those rules in advance.
If you need a loan for your home purchase, include a mortgage lender as soon as possible. Likewise, it may save valuable time to invite your agent’s favorite home inspector onto the team. Detecting and correcting deal-threatening flaws early are one of the best ways to keep a buy-sell schedule on track. Meeting everyone early is vitally important, as effective communication among your team will be key moving forward.
“Also, using the same title company for both closings makes for a smoother transaction on both sides for the title officer,” Creeger notes.
3. Keep Your Market(s) in Mind
It’s important to understand both real estate markets you’ll face as you negotiate both the sale of your current home and the purchase of your next one. Statistically, you’d fare best if you are a buyer in a buyer’s market and your seller comes from a seller’s market.
Of course if you are buying and selling in the same neighborhood, you’ll lose the advantage on one side of the deal or the other. In that case, consult with your agent on the best strategy to accomplish both sales.
4. Work Together with Your Buyer
To make sure your buyer’s team is fully aware of the hard deadlines they must meet to buy your house, why not include them in setting the contingency dates to close? That way, you can take into account when their funds and your loan will be approved. You can also factor in reasonable windows to complete inspections, repairs and title search, and choose a closing date that you both can attend.
5. Write a Strong Real Estate Contract
One popular cliché of home real estate is that “buyers are liars.” After all, they’re shopping for their dream home and often change their minds for any number of reasons. The best approach to keeping your buyer in check is to negotiate in a fair but firm manner. Give them reasonable time to mentally try on your house, but hold fast and offer few reasons to terminate the sale. For example, you should require an earnest money deposit to make sure they are negotiating in good faith.
The goal is to stick to the terms of your purchase contract and include as few contingencies as possible without losing the push toward simultaneous closings.
6. Play an Active Role in Both Transactions
Be aware going in that your energy is key to pulling off simultaneous closings. Forget what you may think you know about selling a home; selling and buying with contingencies is a much different beast that requires you to hold the leash throughout the process. Plan to stay in constant contact with your real estate agent, monitor the process closely and be available to your buyer as if they were an equal partner, because they are.
7. Stick By Your Purchase Contract
Written correctly, your contingency contract will result in the simultaneous sale of your old and new home while protecting you from carrying two mortgages. All the while, the contingency clause is meant to giving you an out if either sale does not proceed per contract specifications.
Your challenge? Avoid too many extraneous contingencies and hold fast to your purpose.