One of the most difficult aspects of purchasing a home is finding one that fits your needs and budget. It’s even more difficult if you’re in a hot housing market.
Selling your home is a big decision. It also means that you’ll need to find the right house for you and your family.
The process can be long and stressful, but it’s important to remember that there are benefits as well as drawbacks.
Let’s take a look at this article in reference to things to consider when you ask the question can you put an offer on a house before yours is sold.
You can put an offer on a house before yours is sold by using a contingency clause
So what is a contingency clause?
A contingency clause is an agreement that allows you to put in an offer on someone else property with a contingency upon selling your property.
For example, if I want to sell my home and I need to buy another one. I can negotiate with the other owner a price. Sign a contract agreement with the newer owner but add a contingency upon the sale of my current property.
If the owner agrees to the contingency, I can now sign an agreement with the owner but I would need to sell my house before we can go to closing.
If for some reason my house doesn’t sell then I’m not fully obligated to buy the new owner’s home.
What Are The Pros And Cons Of Putting An Offer On A House Before Yours Is Sold
You might think that putting an offer on a house before yours is sold would give you the upper hand, but there are some drawbacks.
One of the drawbacks is trying to bid against other buyers in a hot market.
When there is a hot market it can be very difficult to get sellers to agree to the contingency upon selling of your home when you have other buyers who do not have those contingencies on their offer.
Another drawback you might have is when a seller needs to sell their home quickly. Sometimes you do run across Sellers who are motivated to sell.
These are sellers who might want to close quickly. Typically a home could close within 30 days after the acceptance of an offer on residential property.
When you keep that in mind if your current market is not hot then you could be waiting 30 to 90 days to get your home sold.
If this is the case some sellers might not want to extend your closing date to give you time to sell your property and would then want to break their agreement with you if a new buyer makes an offer without the same contingent.
Consider this a con about putting your home on the market before yours is sold.
What would be a benefit of putting an offer on a house before yours is sold?
You would curve the waiting process.
You would not have to necessarily wait for a long period. You would cut your time of finding a home down.
This would be good for you because you can now sell your house and close on the one you just found.
Is it possible to do this? Yes, anything is possible in Real Estate. It’s all about whatever terms a Seller and Buyer agree upon.
But keep in mind in a hot market the rules are a little different because you are now in a bidding war with other buyers of property.
How Do I Make A Offer On A House Before My House Closes
To make an offer on a property before yours is close you will need to get an Approval Letter from your lender.
This can be done by a lender of your choice. There are so many different lenders to choose from.
Once you have your lender of choice. The next step would be to ask the lender to qualify you for a full Approval letter.
The reason that you want to ask for full approval is that you will be sending in your full documents to the lender.
Once this is done. The lender will give you an approval amount. This will be based on your income. When you have this you are now approved to buy a home.
Two ways you might get approved
There are two ways that you might get approved.
1. You might get approved to buy a new home even if your current home has not sold yet. This is based on your income, tax returns and debt to income ratios. It’s all about your debt to income ratio.
This is very important! Because, if your loan is not based upon the sale of your home then you can purchase a new home and not have to add a contingent upon the sale of your current home.
This can work if you own your home free and clear.
If you own your home free and clear then that would mean you have no obligated debt and you could qualify to buy a second home or a new home without having the contingent upon the sale of your current home.
2. You are approved for your loan but it is contingent upon the sale of your property.
Of course, many people will fall under this one. This is when you will need to add the contingent clause of the sale of your property to the Real Estate Contract.
Find A Real Estate Agent
Next, you will need to search for a Real Estate Agent and let them know that you are working to sell your property but you want to buy a new one.
You will need to let the Realtor know that you will need to make offers contingent upon you selling your home.
Remember, to let the Realtor know upfront and allow the Realtor to determine whether or not they will be able to show you properties with a contingent upon the sale of your current property.
Make The Offer
Once you have a home that interest you, consult your Real Estate Agent and make the offer on the property.
Remember, that you will need to make sure that you include the contingent clause upon you selling your current home.
Always remember to allow the seller to decide on whether or not they want to accept your offer with the contingent to sell your home.
If you were approved and you don’t have to sell your home to make the offer. Then you would just make an offer on the property that you want with your Real Estate agent and then work to close on the home.
You should be able to put your home on the market without worrying about having a contingent clause.
How Do You Get Around Buying A House With A Contingent Clause
There might be some sellers that will not even accept offers with contingencies because they don’t want to deal with any potential buyers backing out at the last minute.
Just think about it. Put yourself in that seller’s shoes.
If you were to place your home on the market right now and receive offers.
How many offers will you accept that have contingency clauses on them?
So if you answered no you wouldn’t then there are a lot of sellers who feel the same way that you do.
So what do you need to do about it to clear the contingent clause?
There are 3 possible ways that you might be able to get past the contingent clause.
1. Offer to give a larger amount in option money.
Remember, that if you decide to do an option period. You might be able to increase the option money on your offer.
What this does is benefit the seller because it is money that the seller will receive directly. To structure this, you would make your offer with a larger amount of Option Money.
You would then increase the Option Period to at least 35 days.
What this will do is allow you the option to buy the property within 35 days.
Remember having a longer Option Period will bypass having to have a contingent upon the selling of the property because now you have an option to buy the property.
If for some reason you don’t want to buy the property or you can’t sell your home you will then relay the Option and you will receive your earnest money back.
The seller will keep the Option Money. This is called something different in other states ( Read that again)
2. You can sell the home and then ask for a 30 to 60-day leaseback.
If you sell the property you can request that the new buyers give you a 30 to 60-day leaseback. What this will do is it will clear the contingent clause of having to sell your home.
When you sell you home to a new buyer, The new buyer of your home gives you a 30 to 60-day leaseback.
You now have at least 30 to 60 days to look for your new home, make an offer on it and close.
One of the drawbacks to doing this is finding a buyer would allow you to lease the property back for at least 30 days to 60 days.
3. You can sell your home and then move into an apartment temporarily.
If you are thinking about buying a new build. It might be a good idea to think about a lease somewhere for at least 6 months.
Sometimes buying newly built homes requires that you wait until the home is completed before you go to closing.
New builds could take up to 8 to 9 months to complete. So it would be a good idea to think about renting some where. This will allow you to remove the contingent clause of you selling your current home to buy a new home.
You can also do this if you are thinking about buying an existing home but it would be a good idea to see if you could add an escape clause to your lease.
What this would be is an amount that you would pay to be let out your lease but you will need to negotiate this when you decide to lease somewhere.
What this does is if you decide to sign a 6-month lease temporarily until you find your place you could then take your time to look for a home. This works if you are in a hot market.
When you do this make sure you let the management know that you would like to see if they could give you some type of out clause that allows you to pay a set amount of money that will let you out of the lease.
If you don’t have a clause like this then you would be responsible for paying the remaining amount of the lease.
Conclusion
If you’re in the market for a new home, there are many reasons why putting an offer on another house before yours is sold might be beneficial.
There are also some potential drawbacks to this strategy that buyers should consider so they can make the best decision possible.
That being said, if you have any questions about how to put an offer on a house before yours is sold with contingency clauses or anything else related to real estate transactions, please reach out! I would love to help answer any of your questions and get you started on finding your next dream home.
Let me know if this article helped you when it comes time for making decisions about buying property!