If you’re a second-time homebuyer, you may only be able to buy a house contingent on selling yours. This means you become a buyer and a seller at the same time, with the goal of coordinating these activities within a month or two. This can be a challenge, but applying the right strategies can make a difference and allow you to avoid managing a second mortgage.
1. Understand The Contingency Agreement
Make sure you know all the details of your contingency agreement, so you know what to expect. If you accept an offer on your home, you should know how long you have to buy another, and vice-versa. This way, you can plan to buy a house contingent on selling yours within a tight timeframe.
2. Accept the “Bump Clause”
To buy a house contingent on selling yours, you have to accept your offer may be rejected, usually due to a “bump clause.” This means sellers can reject your offer in favor of a non-contingent one. This doesn’t always mean your offer will be rejected, but it will be more likely in a seller’s market.
3. Consider Capital Gains
When you sell a house and buy another, you may be subject to capital gains tax. If you lived in the home at least two years, you should be in the clear, but if you rented the house or didn’t live in it intermittently, it’s a good idea to consider capital gains before making a sale.
4. Sell Aggressively
If you want your contingent offer to be considered, you have to make it clear that you’re serious about selling your home. This means staging your home, using modern design trends, painting walls and trim, fixing anything that could turn buyers away, using curb appeal, taking attractive photos, and pricing your house appropriately.
5. Buy Aggressively
A seller will accept a less risky, non-contingent offer first, unless they have incentive to do otherwise. To buy a house contingent on selling yours, you’ll need to be ready to out-bid other buyers without contingencies.
6. Negotiate With Your Buyers and Sellers
Remember that your buyers and sellers are people too, and they might be willing to make some concessions if you give them something in return. Tell your sellers they can stay in the home another two weeks for free if they’ll allow you to coordinate with your buyers, or ask your buyers if they’ll move the settlement date up or down if you cover some closing costs. Help out the other party, get an understanding of their situation and plans, and they may be willing to help you too.
7. Know What You Want
To buy a house contingent on selling yours, you may need to find your forever home quickly and make an offer without hesitation. This means you should know exactly what you want; neighborhoods, bedrooms, square footage, amenities, price, and anything that would make or break your deal.
8. Work With A Realtor
If you want to buy a house contingent on selling yours, it helps to have an expert coordinating your search for a new home and homebuyers. A realtor can help you stage your home, speed up your home sale, find a new home you really want, and negotiate both deals simultaneously.
9. Get A Settlement Date First
If you must buy a house contingent on selling yours, it’s impossible to buy a house first. However, with some short-term inconvenience, you can sell your house first and then buy another. This means you should prioritize a selling settlement date. If you already have a settlement date, your contingent offer will be less risky to sellers.
10. Have a Backup Plan
If you sell your house before you can buy another, have a plan B so you don’t have to rush into a new home sale. Have short-term living arrangements in mind, either a month-to-month apartment or family and friends, so you’ll have time to find a house that you really want.
If managing two mortgages isn’t an option and you decide to buy a house contingent on selling yours, it’s best to have a well laid-out plan, and help from an experienced realtor. If your offers are bumped or you’re outbid, don’t get discouraged. Buying a house with a contingency is more challenging, but thousands of homeowners do it every year and still find a new home they love.