Trade-up Buyers Travel the Risky Road

By Dian Hymer

It's a great real estate market these days for homeowners who have outgrown their current home and want to trade up to a bigger, more expensive home. Interest rates are at record lows. And, generally, more expensive homes are not selling as quickly as lower-priced homes. This can work to your advantage. trade-up buyers is how to accomplish the move without risking their financial and emotional security. One way is to buy a new home contingent upon the sale of your current home. This approach won't work in a hot seller's market when sellers have so many offers to choose from that they don't have to take one that's contingent on another property selling.

However, in some areas, and in some price ranges, you may find that sellers are willing to consider a contingent offer from a well-qualified buyer, under certain circumstances.

Recently, buyers sold their home in San Francisco, Calif., so that they could move across the bay to Oakland. They lined up temporary living quarters, arranged to store furniture and got preapproved for a mortgage. Then they started looking for a home to buy.

Unfortunately, there were many buyers interested in every listing that they found appealing. They knew they couldn't compete if their offer was contingent on the sale of their San Francisco property.

But that property sold quickly. When they were a week away from closing the sale, they found the house they wanted to buy. There were six other offers. They made their offer contingent upon the closing of their San Francisco sale within five days. Their offer was accepted. To the sellers, it was a reasonable risk to take. Any buyer's inspection contingency would run at least that long.

In this case, the buyers informed the agent who was selling their San Francisco home to give the listing agent of the home they were trying to buy any information she wanted about the status of the San Francisco sale. This enabled the listing agent of the Oakland property to inform her clients that the closing of the buyer's San Francisco home was pretty much a sure thing.

These buyers had to make a brief interim move. But the inconvenience was more than offset by the fact that they didn't end up owning two homes in a changing market.

Another couple recently transferred from Oakland to North Carolina.

The market is softer there. They might have been able to buy contingent on the sale of their Oakland home. However, they decided to sell their Oakland home first. This way they knew exactly how much money they had to work with.

When all contingencies were removed from the contract, they went to Raleigh and negotiated the purchase of a new home. The sale was contingent on the closing of the Oakland property. The Oakland family negotiated an option to rent back the Oakland home so that they didn't have to move twice.

House Hunting Tip: Sellers often demand a higher price for an offer that's contingent on the sale of another property. You'll be in a better bargaining position if you can make an offer that's not contingent on your home selling.

There's a big difference between an offer that's contingent on your home selling and one that's contingent on your home closing. If you have already found a buyer for your home, the seller doesn't have to worry about whether you'll select a realistic list price for your home.

The Closing: Sellers don't like contingent sale offers because they're risky. Decrease that risk by selling first, and you'll find more receptive sellers.