How Selling a House Contingent on Finding a Replacement Works
Are you wondering if you make sell contingent on finding a replacement home?
You can, but I will try to talk you out of it.
Many homeowners want to know how to buy a house contingent on selling theirs. It’s not easy.
When real estate agents look at homes for their clients and see the language in the listing that says “subject to the seller finding suitable housing,” their blood is most likely to boil.
Frankly, this is one of the dumbest things you can do when selling a home! It is a complete turn-off for everyone involved but you.
Selling a home contingent on finding a replacement may seem like a great idea, but it’s not.
It is a type of contingency that buyers and real estate agents dislike.
How A Suitable Housing Contingency Works
The way the seller contingency clause works is simple.
You put your home up for sale but make it clear that you can only sell if you successfully purchase another home before the deal finalizes.
Unfortunately, while this arrangement may prevent you from going homeless, it can also prevent you from finding the best buyer or the one who will pay the most.
Selling a home contingent on finding another can backfire quickly, making it increasingly difficult to sell your house.
At least theoretically, you have a surprising amount of leeway in selling your home. You can sell your home contingent on finding a replacement home. If you fail to find a house for whatever reason, the sale does not go through.
The buyer keeps their earnest money, and you keep your home. Just because you can do something does not mean you should, however.
You could also demand that the buyer pays in hundred dollar bills or that the house remain blue for the next ten years. Unreasonable demands are likely to send buyers looking elsewhere.
When you think about it, selling your house with this kind of contingency is unreasonable and has no benefits for the buyer.
It is the exact opposite of buying a home contingent on selling the one you own, which is also not usually going to fly. Attempting to put unreasonable contingencies into real estate contracts rarely ever works.
Suitable Housing Contingency Clause Example
Here is what suitable housing contingency language would look like in a real estate contract. The sale of the home located at 50 Main Street, Hopkinton, Massachusetts, is subject to the seller finding suitable housing. The deal shall be terminated if the seller cannot find suitable housing by “X” date.
The typical time frame for a seller to find suitable housing is usually one to three weeks. When a seller cannot find a suitable house in the agreed-upon time, a buyer would need to grant the seller an extension.
The contract will be terminated if the buyer does not wish to grant an extension.
Wasted Effort With Suitable Property Contingencies
Buying a home is not necessarily easy – something you will discover when you are scrambling to find a home so that yours will sell. It takes time to locate a suitable property.
You have to find a real estate agent you trust, determine what you can spend and what you want, and then view any number of properties.
When you finally find one you want, you need to make an offer and hold your breath in hopes it is accepted. You then have to go over that property with a fine-tooth comb.
You will spend money on a home inspection, hiring a real estate lawyer for a contract review, applying for a loan, and more.
It is difficult and emotional work that only becomes worthwhile when you finally get the home of your dreams.
But a buyer who agrees to your suitable housing contingency never knows if they have purchased the home if you have a clause that says the purchase is contingent on finding another home.
It takes a unique individual to agree to such terms, and it is easy to imagine this type of contingency working in only rare circumstances.
If your home was in extremely high demand, for instance, you might be able to find someone willing to go to the trouble.
However, if your home is not exceptional, selling on this type of contingency will almost surely drive buyers away.
Getting top dollar for your home is about attracting the most interested people. When you eliminate a significant portion of the buyers, that doesn’t happen.
The odds of getting the best price for your home drop dramatically.
Buyers Are Forced to Spend Money On a Property They May Not Buy
When buying a home, it is common to have a due diligence period of a couple weeks to get everything in order.
As a buyer, you will be spending quite a few dollars to make it happen, including the following:
Hiring a Home Inspector
You can expect to spend around $500-$1000 depending on the home inspector and all the types of inspections you do.
Some common inspections during the home buying process include radon, water, mold, lead paint, and a general building inspection. These are usually part of a buyer’s home inspection checklist.
Many buyers will not want to spend this money with a suitable housing contingency. They could be out a significant amount of money.
Applying for a Mortgage
A buyer can expect to pay another few hundred dollars and maybe more on getting the mortgage application done with a lender.
Hiring a Real Estate Attorney For Contract Review
Getting a lawyer to review the contract to purchase could be another $500-$1000, depending on the lawyer and customary charges for a particular location.
You Lose Buyers When The Sale is Contingent on Finding a Replacement Home
Imagine yourself in the buyer’s shoes, and it becomes easy to understand why this selling contingency is frowned upon. It makes an already stressful situation unworkable – something to avoid if you want to sell.
Who in their right mind will want to spend money on all these things without knowing whether they have purchased a home?
Subject to the seller finding suitable housing clauses increase the odds that you will be unsuccessful in getting the best buyer for your home!
The buyer’s cost only scratches the surface of why agreeing to such a contingency is completely moronic for most buyers. The vast majority of buyers out looking at real estate are probably coming from one of two scenarios.
Either they have their current home under contract or have been renting.
In both circumstances, they likely have a deadline by which they need to find other housing. Trying to buy a home where the seller has made selling contingent on finding another property will be nearly impossible.
Unless everything falls into place perfectly, the buyer is making a massive gamble of finding themselves homeless! It can’t be emphasized more that as a seller, you are eliminating many buyers from considering your home with a suitable housing contingency clause.
Suitable Housing Clauses Are Not a Good Way to Do Business
Selling your home is a business transaction. You need to think like a business person to get the best results. Good business trades value for value – both parties feel like they benefit from the transaction, and both walk away happy.
The problem with selling a home contingent on finding a replacement home is that it focuses entirely on your needs and ignores the buyer’s needs.
In this market, plenty of other sellers are willing to be more attentive and offer a win-win scenario.
Realtors and the buyers they represent will naturally steer clear of your property when they perceive it to be troublesome or difficult.
You will dramatically decrease the odds of having a bidding war on your home.
Even if the buyer is unaware of the challenges you are presenting as a seller, their Realtor will speak up long before any deal is made. All of the above expenses may be necessary, but they might as well go towards a relatively sure thing.
The Best Real Estate Agents Explain The Downsides of Suitable Housing Clauses
Will you be able to find a Realtor who will agree to list the home under your terms of selling contingent on finding another property? Absolutely without question, you will.
Some real estate agents won’t give a second thought about doing ANYTHING a seller asks them to as long as it’s not breaking the law. This doesn’t mean it is an intelligent thing to do. Far from it!
A great real estate agent will review all the pros and cons of the “subject to selling a home contingent on finding another” clause inserted in the multiple listing service.
More than likely, the agent who says nothing and agrees to do whatever you want doesn’t care if your home sells. They are desperate for business. Having your listing is a way to make their phone ring.
If they don’t sell your home, it doesn’t matter because they are using your property to get buyer leads from the best real estate websites, sign calls, and other forms of real estate marketing.
They can then sell other homes from the additional business your listing has generated. Exceptional sellers’ agents don’t cave so easily. They will explain why a seller contingency clause can hurt you financially.
Suitable Housing Contingencies Are Bad For Your Sale
Being seen as unreasonable can have lasting damage to your listing and create somewhat of a domino effect.
The more buyers and Realtors come to avoid your property, the more of a stigma it will develop.
It will stay on the market longer, and you will gain a reputation as someone who does not want to sell.
This can result in lowball offers and sometimes no offers at all.
Eventually, you will have to take the listing down or sell for a price lower than what you would have gotten in more favorable circumstances.
Creating barriers to a sale is almost as bad as overpricing a home. In both circumstances, you increase the odds that your home will stay on the market longer. The last thing you want as a seller is to have the number of days on the market become inflated.
The longer a home remains on the market, the greater your chances of getting lower offers. High days on the market are a killer in real estate sales.
You also risk the market turning on you. Housing prices fluctuate, and it is possible that your listing will take long enough to sell that you become trapped. Your original asking price no longer reflects the current market, and you must drop the price to remain competitive.
Focus on The Long Game When Selling a House
Just because you sell your home before buying another one does not mean you will become homeless. You can still figure something out if you need to wait until your home sells before purchasing another.
Some sellers move in with family for a while before finding the perfect house, while others rent. Buying and selling a house at the same time is not that hard to do. It’s what most people do!
Homeowners – especially those that have owned for a long time – sometimes forget that renting is not the end of the world, especially if you have a long-term plan.
Buying your next house should be something you spend time on and consider carefully. Arranging for temporary living quarters can give you time to do the looking and shopping around necessary to find what you want. You are not the only seller in this situation.
Discuss your options with the Realtors you are interviewing to determine what other people in your situation have done before.
Your real estate agent may have some excellent options that others have taken advantage of. You may have to aprettyrly quickly during the transition period, but plenty of sellers have done it before.
In the end, you will have the home you want, and you will have made the sale you needed to make.
Final Thoughts
Hopefully, you have concluded that selling a home contingent on finding another home is not the best way to buy and sell real estate!
When you would like your home to be pending quickly for top dollar, this is not the way to accomplish that goal.
About the author: Bill Gassett, a nationally recognized leader in his field, provided the above Real Estate information on a sale contingent on sellers finding a replacement home. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 37+ years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Natick, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
