Most of the time buying and selling a home will go hand in hand with one another. Many times someone that is selling a home is also going to be purchasing another one at the same time, and in the perfect world these two things would happen in a timely fashion. In this article we will go over some home sale contingencies are and how they effect both the buyers and sellers of homes.
What Are Home Sale Contingencies?
A real estate contract is a contract to purchase a home, or other type of property. Contingencies are stipulations about the closing process that is going to go on between the parties involved with the property sale. A home sale contingencies is a certain type of contingency that says you will only buy the home after a buyer’s house is sold. If the home the buyer is currently living in is not sold by the specific time stated in the contract then the contract is no longer valid and either party can back out of it.
In general, there are two types of contingencies. The first is called the sale and settlement contingency. A sale and settlement contingency (all one word) is used when the buyer has not received an offer on his own home, and the buyer is given a deadline to sell before the contract is terminated. The seller can still market the home during this time, and if the seller receives an offer, the first buyer has about 24-48 hours to remove the contingency and purchase the home. Otherwise, the seller can terminate the contract and sell to the second buyer. This type of sale can be very stressful for buyers because they need a fast home sale in order to secure the home they made an offer for.
The second type of contingency is the settlement contingency. This type of contingency is when the buyer already has an offer on the house but has not gone through the entire closing process. With this type of contingency a buyer is given a set amount of time to close before he is able to purchase the home. This is more of a protective item for the buyer so they are not stuck with two homes that they have to pay for. With this contingency the seller is not typically able to accept offers on the home unless the buyer is not able to meet the deadline.
What Should Buyers Consider With Contingency?
Having a home sale contingency helps buyer secure a property that they can easily move into after they finish their own home sale process. However, this sort of security comes with a cost, and buyers who put a home sale contingency on their real estate contract usually end up paying a higher sales price for the home.
But because the cost of selling a house and buying another one do not change and if the first offer does fall through the money will not be able to be recouped. If you have done things like a home appraisal, home inspection, and banking fees, these cost will already be gone if the deal does fall through.
What should sellers consider before accepting a home sale contingency?
A seller is typically taking all of the risk when they accept a contingency, but in today’s market it is often the norm and something that does need to be done in order to sell. In this market is might be hard to get another offer, but on the other hand, it will be harder to find another buyer if your home is currently ‘under contract’.
This is why it is important to make the gamble in a well thought out manner. Sellers will have to decide if the buyer’s home is going to be able to sell by the time the contingency expires. If you do not do any research on the buyer’s home you may end up with many months being wasted with an expired offer and find yourself starting all over again.