By Antonio Cardenas
How can homeowners buy a replacement house before selling their present home? When a person who wants to purchase another house, using the proceeds from the sale of their existing house, they have to make an offer with the condition that their present home has to be sold first, hence the CONTINGENT OFFER.
When the seller accepts an offer contingent on the buyers selling their home, typically he gives the buyers 30 days to get a buyer for their house. The seller, however, keeps his house on the open market, even though he accepted the contingent offer. If the seller gets another offer that is non-contingent, (the buyer does not have a house to sell) the seller can accept it and give the first offer a 72 hour time limit to come up with a different type of financing that does not include the proceeds from the sale of their house.
Depending on the equity position of the homeowners, there is a possibility of obtaining a short term loan called “a Bridge Loan” this loan sometimes encumbers both properties, the old one and the new one, and the bridge loan has to be paid when the old property closes escrow. For most people, this is about the only way that they can purchase a replacement home.
These types of residential sales are quite common, most people have to play it safe and always have a place to live without having to rent for a while, which by the way, is another option. This scenario can happen if properly executed, do your homework in advance, find out if you can qualify for a bridge loan, prepare your present home and be ready to go on the market priced properly so you can quickly attract a good buyer.
There are two types of contingencies: An offer contingent on closing escrow, means you already have a buyer for your house, this is better than an offer contingent on selling the house. The second one means you have not even put your house on the market and have no buyer yet.
Finally, another option would be to put your house on the market first with a REVERSE CONTINGENCY, meaning you will sell your house, with this condition: that you find a replacement home within 30 days of acceptance of the offer, or you are not obligated to sell it. Remember that in real estate, everything is negotiable and possible, as long as you clearly understand your options and responsibilities. Make sure you get an experienced Realtor to help you write these conditions properly. Happy house hunting!