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How does buying on home sale contingency work? Episode #318
How Does Buying On Home Sale Contingency Work?
Hello and welcome to Todd Miller TV. I got a question from the Ask the Expert which is the red button over there on the left hand side of the page and so I’m going to answer it with a video because it’s probably something that other people will have the same question too.
So the question is on a home sale contingency. So here’s the scenario. You own a house but you want to move but you don’t have enough cash or financing available to just go buy another house outright. You have to have this one closed. Get that payment off your credit report. Take whatever cash is out of it and move it to the next house.
So what some people do is they just sell the house and then they get the cash and then they go buy the next house but what other people try to do is they try to go from one house to the next house pretty smoothly. So you can do that. This is how you do it.
You go make an offer on the house you want contingent upon your house selling meaning hey, we will buy your house. We will give you 150,000 for it. We’re going to get a loan and we’re going to close but we don’t know the closing date. But our house is on the market or we’re going to sell it but we want to make it contingent.
So if our house doesn’t sell, then we want our earnest money back. So you can do that. Now in this market, Vegas is probably not going to work because no one would want to accept that offer because you can get 10 or 20 offers. That would be like the absolute worst offer you could possibly see because it just ties up the house for sale that may or may not happen.
So there’s a couple of ways you can handle that. Let’s say you’re in the market, a normal market or part of the country where this is pretty common. The question always is, is “If you’re the home seller, what if somebody else comes along?” And this is how you handle that.
If you’re the seller and another buyer comes along and says, “Look, we just want to buy your house. We don’t have a home sale contingency.” You have to go back to the first person and say, “Give up your EMD and close within this number of days or we get to sell it to the other house or to the other people,” and you have to have that agreed to in writing right upfront. That’s sort of the strategy to use. It’s just you want it all in writing. It’s a good technique. It’s a technique we use here when we’re negotiating these out. We always give the seller an out that if another person comes along, they can let the buyer out.
So the seller has an out which is another buyer shows up. They don’t have a contingency. They can throw the first person out. OK?
Now you’re saying, “What about the buyer? Am I protected?” Sure. Your protection is you make sure in writing that if you don’t – if your house doesn’t sell or if you can’t sell it or if the buyer tries to throw you out, that you just get your earnest money back and you just agree to it all in writing upfront. But whatever is going to happen with the earnest money and the whole deal is just going to be what everyone agreed to.
There’s not really a standard way. There’s two or three general ways that happens and I’ve sort of gone through them. So buying with home sale contingency, you can do it. The easiest thing though is sell the house first. Move in with a friend. Put your stuff in storage until you get the next house. That’s the easiest way to do it especially right now in this market.
Anyway, I thought I would share that with you. That’s my update for today and hope to see you on another video. Thanks.