I’ve got several clients right now that need to sell their old house before they can buy a new one. It’s not a fun spot to be in during a seller’s market.
You would think when almost all houses sell quickly that a seller would happily accept an offer from somebody who needs to sell their old house first. But, odds are the seller is getting multiple offers, so why wouldn’t they pick the one without a contingency to sell?
Time to clarify a few things: A contingency to sell is when you haven’t sold your old house yet and nobody has any idea when you can actually close on the new house. A contingency to close means your old house has in fact sold, and assuming the buyer of your old house makes it to the finish line, so will you.
When you make an offer contingent on selling your old house, it is pretty standard for a seller to counter back with what is called a kickout clause. That means that the seller will accept your offer, but they will keep their house on the market and hope to catch a buyer without a contingency. If they do, then you’ll have a limited amount of time to remove the contingency and buy the house without having to sell your old one, or you agree to walk away and let the seller and their new buyer enter into a sale together. If it is impossible for you to remove the contingency and buy the house, then you will lose the house to the new buyer.
For this reason, I am telling my buyers who need to sell their old house first to not even look at a house until it has been on the market for a while. Let’s say you are the first buyer to see a house and you make an offer contingent on selling your old house. The seller accepts it with a kickout clause. You are feeling good. Then the next day, the seller gets an offer without a contingency. You lose it. If you think about it……whether you buy it the first day on the market or the 10th day on the market, the end result is the same: IF another buyer comes around and wants it, you will get kicked out. IF no buyer comes along, then it will still be there when you make an offer after every other buyer has had a chance to see it. There really is no urgency to write a contingency offer due to this reason, and waiting a bit prevents a lot of heartache for you.
So what’s the strategy then?
If you can, the best solution to preventing this problem is to sell your old house first. You will then be able to make an offer without a contingency. You stand a better chance of getting the house you want. This will also keep your from having to potentially sell your house for a little less than it is worth to ensure it sells immediately and you don’t loose your new house. The downside of this is that you are moving twice.
You can pay a premium for the new house. Sometimes if a seller is getting a few thousand more than the next offer, they might choose not to kick you out. The downside of this route is that you are paying a premium for the luxury of not having to move twice. Moving twice costs you more and is more of a hassle, so maybe it is worth it to you.
Either way is painful really. There is no easy button to push when you have to sell your old house to buy a new one. Not in such a seller’s market.