Can I Sell Contingent on Finding a Replacement Home ?

by Dian Hymer

Repeat homebuyers face an inevitable dilemma. Should they sell their current home before they buy a new one? Or should they buy before they sell?

For some homeowners the answer is obvious. They can't afford to buy until their existing home is sold. The only way they can buy first is if they can find a seller who's willing to accept an offer that's contingent on the sale of their home.

In a low-inventory seller's market, contingent sale offers usually don't work. Contingent sale offers have a higher success rate in a buyer's market where there are many more homes for sale than there are qualified buyers.

Repeat buyers often resist the notion of selling first. Suppose their home sells quickly and they have to move out within 60 days. The pressure's on to find a replacement home. If they can't find anything suitable, they might have to move twice: first to an interim rental, then to their replacement home when they find it.

Other considerations can come into play. When the real estate market is rising rapidly, homeowners don't want to let go of their homes unless they have another one to trade into. They don't want to miss out on home price appreciation. However, in a stable or declining market, your money might actually earn more invested elsewhere than it will in your home.

Homeowners are also sensitive to losing the tax benefits of ownership (mortgage interest and property tax deductions) if they have to rent for awhile. The actual loss will depend on how much rent you pay, your tax bracket, and how much the proceeds from your home sale will earn while invested.

Let's say you need to sell to buy. You've tried a few contingent sale offers, without success. You can't bring yourself to sell without having a replacement home lined up. Why not list your home for sale contingent on finding a replacement home?

Buyers don't like contingent sellers because their home is only conditionally for sale. With a contingency to find a replacement home, the sellers don't have to go through with the sale unless they find another home they want to buy.

Motivated buyers usually have a time frame within which they want to buy. They want to buy a property that's definitely for sale. Most buyers won't waste their time and money on a home that's only conditionally for sale.

Repeat Home Buyer's Tip: You may be able to successfully sell your home contingent on finding a replacement if there are very few homes for sale in your area, and you have a highly desirable home. Even so, you may have to accept a lower price than you would if your home were unconditionally for sale.

To make your marketing package more desirable, set a time limit by which you will find a replacement-say two or three weeks from the time you enter into contract with the buyers. Also, offer to reimburse your buyers for any costs they incur on the purchase of your home -- such as for inspections or for an appraisal -- if you don't go through with the sale of your home.

The Closing: A better marketing strategy is to list your home for sale with a provision that you may need a long closing or the option to rent back your home from the buyers after closing. This approach helps you avoid having to make an interim move. And it doesn't discourage buyers who won't look at a listing that's contingent on the sellers finding a home.