See how to buy a house when you have a house to sell.

Buying a home when you already own a home requires a bit of logistical gymnastics. Just exactly how do you time the sale of your existing home, so you have down payment cash on hand to buy the new one? One approach is to include a contingency in your purchase offer, but this might not be optimal. Let’s take a look at how home sale contingencies work and some alternatives.

What’s a home sale contingency?

A contingency is anything written in a home purchase offer that makes the offer conditional. A home sale contingency means the buyer asks for time to sell their current home before finalizing the purchase of a new one. Often, the contingency period is 30 to 60 days.

How sellers might view a home sale contingency

In a seller’s market, offers with a home sale contingency are often turned down in favor of those that aren’t conditional on the buyer selling a home. The contingency poses a risk for the seller; if the buyer’s house is slow to sell, or doesn’t sell at all, it will delay the seller’s sale and plans.

If the real estate market is slow or the seller’s home has been on the market for an extended period, sellers may be willing to work with a buyer who needs to sell a home. However, they may accept the home sale contingency with a contingency of their own. It’s not unusual for a  seller to ask for a kick-out clause. This means the seller accepts the offer but leaves the home on the market. If they receive a better offer, they notify the first buyer who must decide if they want to waive the home sale contingency and see the sale through or walk away. Buyers in this position must decide quickly, usually within three days.

When you want the new house, but your current house isn’t sold

If you don’t want to let the new house go you can get a specialized loan. Bridge loans are designed to finance the gap between selling one home and buying another. They typically only require interest payments and are repaid within six to twelve months. Most home buyers pay off bridge loans with a balloon payment when they sell their current house.

When using a bridge loan, you’ll have two monthly payments: one for the mortgage on your current house and the bridge loan for the new house.

Alternatives to home sale contingencies

If it feels like buying and selling a home simultaneously would create too much stress there are other options. You can sidestep the need for a home sale contingency by selling your home and moving into a rental until you find your new home. Alternatively, you could store your belongings and stay with a friend or family member temporarily. Yes, you’ll have to move twice but you’ll have less financial stress and be able to present a stronger purchase offer when you find your dream home.

Get answers to your mortgage questions

To learn more about the mortgage process, dive into our mortgage toolkit. If you have questions about anything mortgage-related reach out to one of our mortgage loan officers online or call us at 800.991.2221.

 

 All loans subject to approval. Rates, terms, and conditions are subject to change may vary based on credit worthiness, qualifications and collateral conditions.