Let's talk best strategies for making a contingent offer on a home 🤝. If you’ve started researching how to sell your home, there’s a chance you’ll have heard the term “contingency”.
- con·tin·gen·cy • noun
a contingent event or condition: such as something liable to happen as an adjunct to or result of something else
Applying this to a real estate context, there may be many contingencies when you buy a home, and you can read up on the most common ones on our blog.
The main contingency we’re going to focus on, and which often throws up barriers to purchasing a home, is:
The Home Sale Contingency
Buying a new home is an exciting time, but it can be challenging if you're contingent on selling your current home first.
This means that you can't buy the new home until your current home sells; you need those funds from the sale to purchase your next property.
Some homeowners have enough savings that they’re able to close on their new home without needing the funds of their existing home sale, but for the rest of us, this is an important contingency as we need that money to buy!
Why does this put you at a disadvantage? 👎 If you’ve found your perfect next home, whether it’s:
- bigger than the one you’ve got, to accommodate your growing family, or
- a downsized property, since you’re an empty nester, or
- in a new state, as your job relocated you…
…whatever that reason might be, there’s no guarantee that your home will sell quickly (or at all 😳).
A home sale contingency gives you the right to back out of the purchase of the new home if your current home does not sell.
The sellers might see this stipulation in your offer as a red flag , and instead choose another buyer who doesn't have this limitation.
However, the stage you’re at in your own selling journey may help you out, for example:
- If you're already under contract. Perhaps you’ve already listed your property using the services of a listing agent. The agent held open houses for you, set up showings, and you’ve accepted an offer and are under contract. Because you’ve already surpassed some of the hardest hurdles of selling a home, this will make the offer you make on your next home more attractive.
- If you've not even started. Maybe you’ve already spoken to a real estate agent and only discussed selling your home, or you’ve only just put your home on the market with no offer in hand. Because you’ve still got a ways to go, any offer you make on a home will be less attractive. So now let’s talk about…
Strategies To Getting Your Offer Accepted
If you don’t have any option BUT to put in a contingent offer, there’s many steps you can take to set yourself up for success. Here’s some steps that our clients took:
Get your home ready for market early
As mentioned above, a contingent home that is already under contract presents a far more attractive proposal. But what are the steps you take to get there?
- Finding a real estate agent. The likelihood is you’ll need the expertise of a trusted realtor to guide you through this process, if you want a chance of getting an offer accepted (read more on this below).
- Get pre-approved for your next mortgage. One of the most important steps of buying a home is getting pre-approval from a trusted local mortgage lender. This way you can present an offer alongside your pre-approval letter when you find the home and the seller will know you’re ready to go and won't be causing them unnecessary delays.
- Hire a real estate attorney. This attorney will be by your side during contract-writing and negotiations. Hire a vetted attorney your real estate agent recommends.
- Have your agent conduct a sell analysis. While you may love your orange flowery wallpaper and bright green living room, a realtor is likely going to warn you that neutral is the way to go. You can add thousands to your home value by making a few changes to prepare your home for market.
- Set a realistic price. Lean on your trusted realtor to create a listing price that is fair and at (or even slightly below) market value, to attract the most amount of traffic, which will, in the end, push up the price.
- Prepare your home for photography. Your agent should be telling you a date for when they’ll stop by with their professional photographer and videographer. They should provide you with a checklist and offer guidance on how to make your home shine for filming day, and subsequently showings and open houses. You’ll want to clean and minimize the clutter so that it’s easier for buyers to visualize themselves living in your home.
- Step aside for showings and open houses. While you might think it best to be around for these important dates so you can tell potential buyers about your amazing home, you're actually better of vacating the premises and letting your agent deal with these things. Having the seller present can put undue pressure on buyers and make them uncomfortable, and they might not feel they can speak freely to their agent about an offer.
- Review offers. The best bit! You’ve undergone the showings and now you might have several offers coming in, from people who love your home and really want it. Your agent will sit down with you and make them all make sense, so you can figure out what works best for you.
- Get under contract. After you accept an offer with the terms and price that suit you best, they’ll be a three day attorney review period (specific to the state of New Jersey — and maybe a few other states). Once this has ended, you’re officially under contract to sell your home!
It’s likely that somewhere in this process your agent will have already started househunting with you for your next home.
Your agent should have conducted a thorough Buyer Consultation so that they understand your Needs vs Wants list, and will set you up with property alerts so that you get emailed the second a new home hits the market.
Make an A+ offer
Once you’ve found your next home (the one with the perfect number of bedrooms and bathrooms, with an easy commute to work, and alllll that yard space for your energetic Labrador!) it’s time to put an offer in.
You’ll want to wait until your home is already under contract to do this, to be in with the best chance of getting your offer accepted.
Since a home sale contingency is going to work against you, you need to really make your offer shine to help the sellers overlook that factor... especially in a sellers market where you’re up against many other buyers.
Luckily, you have many options when submitting a great offer, and it’s not all about the money. Consider offering:
- closing date flexibillity (can you move in with your parents or a friend in between selling your home and buying the next, to allow the sellers to choose their move-out date?)
- offering a rent-back period to the sellers, allowing them even more flexibility on moving
- waiving some of the home inpection — i.e. saying you'll waive up to the first $5,000 of any repair request items, so that the seller knows you're not looking to nickel and dime them over small repairs in the property
Work with a fantastic real estate agent
This is probably the most important point of all. Never underestimate the importance of having a real estate expert on your side, especially when it comes to running the “comps” (to establish what to price your own home at, and deciding what’s a reasonable offer to put in on a home) and when negotiating.
Working with an incredible agent will really set you up for success. They'll sort out the paperwork side of things, point you in the direction of the best real estate attorneys and other vendors you might need to work with and so much more.
How To Put In A Non-Contingent Offer
If you still think your best chance of securing your next home is with a non-contingent offer, check out the page below for our clients' two favorite finance products that they used to help them move non-contingent.
📮 YOU SHOULD READ: PUTTING IN A NON-CONTINGENT OFFER
