What’s a Contingency Offer? How to Buy a Home with a Back-Up Plan
Selling
Looking for a new home comes with many questions, but one of them must include how you’ll approach selling your old home. Will you wait to sell until your offer has been accepted on another home? Will you start looking for a new place right away?
It’s a difficult balance many buyers must try to achieve: buying one home while selling another.
Of course, one solution for how to approach this conundrum is something called a contingency offer.
What Is a Contingency Offer and When Should You Make One?
If you make an offer on a home that includes a contingency, you promise to purchase the home if your current home sells.
This helps you because it prevents a dreaded circumstance. It happens when you buy a new house but fail to sell your old home, thus ending up with two mortgages and deep trouble. Thus, the contingency makes sure you have the money from the sale of your old house going toward the new one.
Can You Lose the New House if the Old Doesn’t Sell?
You can still lose the new house if you make a contingent offer. This strategy doesn’t guarantee you anything but insurance against owning two homes at once and the associated costs.
When Can a Seller Walk Away?
Of course, the seller has options in this scenario depending on the contract. They will have outs, because there are situations when the contingent offer isn’t in their best interest.
For instance, a contingency clause that’s fairly common is one where the seller has the right to cancel the contract if you can’t commit within 30 days. Also, the seller is allowed to consider other offers in some cases. Finally, it’s legal for them to continue showing the house as long as they are transparent about the fact there’s a pending contract on the property.
The Best Way to Show You’re Serious After Giving a Contingency Offer
Sometimes, putting in a contingent offer makes the seller see you as a bit less serious. You’re hesitant about the offer because you’re just not sure of circumstances. There’s a way, however, to combat being viewed this way.
Once you’re sure of a buyer for your old home, remove the contingency from your offer for the new home. This will show the seller your true commitment and seriousness about purchasing the property.
Of course, there’s always some risk associated with buying a home. It’s a big purchase with lots of steps, decisions, and negotiating. Going with a contingency can help mitigate some of this risk, but you have to know when to use it, when to withdraw it, and when to skip it all together.
If you feel sure that your old home will sell in time for you to buy a new one, you probably don’t need any contingency plan. If you want some extra peace of mind, go for it, but know that it’s not a fail-safe way to secure your dream home.
