Making Contingent Offers.
Making an offer on a home can be an exciting yet stressful experience, especially when that offer is contingent upon selling your current home. While this strategy can be necessary for many buyers, it comes with its own set of challenges that can complicate the home-buying process. Understanding these difficulties and knowing the best practices can help you navigate this tricky situation effectively.
Understanding Contingent Offers
A contingent offer means that the purchase of a new home depends on certain conditions being met—in this case, including the sale of your existing home. While this can protect you from owning two homes at once, it can also make your offer less attractive to sellers in a competitive market. Sellers may prefer offers that don’t come with contingencies, as they often want a quicker and more straightforward transaction.
Challenges of Contingent Offers
Market Competition: In a hot real estate market, homes often receive multiple offers. A contingent offer may be seen as a risk, as it introduces uncertainty about your ability to close. Sellers may choose non-contingent offers from buyers who are already in a better financial position.
Timing Issues: Coordinating the sale of your current home with the purchase of a new one can be challenging. If your home doesn’t sell quickly, you risk losing the opportunity to buy the desired property. This timing issue can create stress and may lead to hasty decisions.
Financing Complications: Securing financing can also be more complicated when your offer is contingent on selling another property. Lenders may require that your current home is under contract before they approve the mortgage for your new home, adding another layer of complexity.
Best Practices for Making a Contingent Offer
Despite the challenges, there are effective strategies you can employ to strengthen your contingent offer and make it more appealing to sellers:
Get Pre-Approved: Before making an offer, obtain a mortgage pre-approval. This demonstrates to sellers that you are a serious buyer and have the financial backing to complete the purchase once your home sells. Being pre-approved first is ALWAYS a good idea, as it will ALWAYS provide additional confidence to sellers.
Price Your Home Competitively: If your current home is priced too high, it may linger on the market, making your contingent offer less attractive. Work with a knowledgeable Realtor to conduct a Comparative Market Analysis (CMA) and set a competitive price that reflects current market conditions. It shows that you’re ready, dialed in to market expectations, and prepared to move.
Consider a Shorter Contingency Period: Offer a shorter time frame for the sale of your current home. This demonstrates to the seller that you are motivated and willing to act quickly. A shorter contingency period may alleviate some of their concerns about uncertainty.
Enhance Your Offer: Consider sweetening your offer with additional incentives. This could include a higher purchase price or covering closing costs. Maybe you are as-is or desire to waive a home inspection? The goal is to make your offer stand out in a competitive market - within your comfort zone of course - thus showing sellers that you are committed and serious.
Communicate Clearly: Transparency is key. Clearly communicate your timeline and intentions to the seller and their agent. If you have a strong marketing plan in place for your current home, share that information to instill confidence in your ability to sell.
Work with an Experienced Realtor: Partnering with a knowledgeable Realtor who understands your local market can be invaluable. They can provide guidance on pricing, marketing strategies, and negotiation tactics to help make your contingent offer more competitive.
Conclusion
While putting in an offer on a home that is contingent upon selling your own can be challenging, it is not impossible. By understanding the difficulties and implementing best practices, you can enhance your chances of success. With the right strategy and a proactive approach, you can navigate the complexities of contingent offers and move toward your goal of home ownership. Don’t hesitate to reach out to a skilled Realtor to help guide you through this process and ensure you make the best decisions for your situation.
