So, you want to buy a house and the only thing standing in the way is unloading your old one. You either can’t or don’t want to get a bridge loan, pull equity out of the old house to fund the downpayment for the new one, or have two mortgages until the old one sells……what are you to do?
You pretty much have two options: Write an offer BEFORE you sell your old one or AFTER you have a contract on the old one. You ought to be out looking while your old place is on the market so you can get a vibe for what you can expect for the money and to learn first hand about locations/neighborhoods. Here are some insights on going either route:
WRITING AN OFFER BEFORE YOU SELL YOUR OLD ONE
This is the route most people want to take. I’ve found people don’t like the unsettle feel of not knowing where they will be living, so they want to focus on signing a contract for a new place before they sell their old one. I can’t say that I blame them, but you rarely get the best deal and most decent realtors will counter back with a kickout clause. A kickout clause is where you have an accepted contract, and as long as nobody else comes along before you sell your house, everything is swell. But, should another buyer come along without such a contingency, you have a specified period to either remove your contingency to sell the old place or bow out of the deal. Also, most any house that is appealing enough to you to want to buy is also going to appeal to other buyers. Long story short, you feel like you’re buying a house but you really may not be. Let’s think this through…….If no other buyer were to come along prior to selling your house, then it will still be available when your old house does sell. If another buyer does come along, you’d have lost it anyway. So, really all you achieve from writing a contingency contract is that you feel like you are buying a house. (Now, sometimes this is a good plan IF you can really remove the contingency should another buyer appear. In that case, this is a good way of tying up the new house until your old one sells.)
Then there is price. The seller perception of a contingency offer is that you are giving them a wish list. To them, they are hearing you say you want to buy their house one day, maybe if, eventually, you sell your house or win the lottery. I have never seen a seller get really motivated to go to their lowest price when they aren’t even sure all this will even happen. I think you can get your best deal by waiting until your house sells and then writing a contract on whatever house you want. Nothing motivates a seller like knowing they are 30 days or so from getting to move. If you do write a contingency offer, know that basically you are paying a “Convenience Fee” by going this route. Who knows, maybe paying a little more for the house may be worth the perceived peace of mind to you. Your call!
WRITING AN OFFER AFTER YOU SELL YOUR HOUSE
I think you are not only going to be in a better position to negotiate, but you can avoid the heartache of losing an awesome house by waiting until you have a contract on your old house. To a seller, a contingency just to close on your old house is much much stronger than asking them to wait for a buyer to bite on your old crib.
When I have gone over all these options with clients, the big question they have is “What do we do if we sell our old house and we can’t find a new one?” I always tell them there is a chance that there might not be a suitable house available when they do sell their old one. I am a darn good realtor, but one thing I haven’t mastered is magic. I can’t make an awesome house appear out of nowhere. Unless you are just super specific about your next house, odds are you can find one in time, close both the same day, and only move once. I’ve never had anybody going this route have to rent temporarily until they found their awesome new place, but it is a risk. Moving twice isn’t fun, but a few rough months becomes a distant memory once you do move into your ideal new place if totally necessary. (I did once have a client who intentionally sold their old house so they could jump on the right one when it came on the market. They were looking in a big time popular area where even in the worst of the market, houses sold fast. They rented for several months while we looked at EVERY house as soon as it came on the market. Their plan worked and they are now living large….and writing a contingency contract would not have got this house because there were multiple offers the first few days it was on the market!)
So, like so much in life, there are obstacles to deal with, and there is often no “One size fits all” decision to make. In some situations, writing a contingency offer makes more sense, but most of the time, waiting to get a contract on your old house is the best way to go.