Monday, June 18, 2007

The Contingent Purchase – or – How to Buy High and Sell Low

You’ve found a great house, one that you really want to own. However, you either need to, or want to sell your current home before closing on the purchase of your new home.

Many people have found themselves in this position and aren’t quite sure what the next step should be.

Consider this…

Let’s say your dream home comes on the market at $500,000. It’s perfect! You’re not entirely convinced the property is worth that kind of money, but you like it so much that you make an offer on the property anyway, contingent on the sale of your current home. The Sellers of your dream home are still optimistic that another, non-contingent Buyer may come along, so they’re not anxious to negotiate. You end up agreeing to pay full price, if you can get your current home sold.

You get your home ready to put on the market quickly, doing the bare minimum of fix-up and clean-up so that the house is as showable as possible. The race begins! Can you get your current home sold before someone else comes along to snatch your dream home out from under you?

A couple weeks go by with no offers on your house. Every time the phone rings, you’re afraid it might be news that someone else has made an offer on your dream home, or you’re hoping it might be the call that there’s an offer on your current home. Neither happens, so you’re stuck in limbo. The questions that start to haunt you are: “Have I overpriced my house?” and “Why is no one else making an offer on my dream house? Did I overpay for it? What’s wrong with it? Could I have bought the house for less if I had no contingency?” Now what!?

The Seller of your dream home is thinking the same thing. He’s got you “on the hook” for $500,000, but no one has come along to either buy your home and satisfy the contingency, or to buy his home and force you out of the transaction. He wants to sell, but he really can’t reduce the price he’s asking for his house to an amount less than you’ve offered. Now what!?

Well, the reality is that you may have bought “high,” and you’re likely to have to sell “low.” That’s not the best way to go, if it can be avoided, and it usually can!

Part of our job on your behalf is to create for you as many options as possible.

  • Is the asking price on your dream home realistic?
  • Do you need to sell your current home, or do you just want to sell it?
  • Is there a financing arrangement that can be put in place to avoid a contingency?
  • Should you sell your home before you even make an offer?

As you can imagine, there are about as many potential situations as there are people shopping for homes right now, since everyone’s situation is a bit different. To avoid falling into this “buy high, sell low” scenario, call us early to discuss a plan that will work best for you!