Sellers Reverse Contingency
Posted Thursday, July 19, 2018
Many sellers worry that if they sell their home without finding a new home right away, they might end up putting belongings into storage & renting. Or even worse, sleeping under a bridge next to a stolen grocery cart. Sellers should try not to fret about selling their current home before finding their next home, there are options they can use to help bridge the gap while taking advantage of today's sellers' market.
You're probably already aware of the shortage of homes for sale at certain price points in our area, specifically those listed for less than $300,000. While this is significantly beneficial for many sellers - who may benefit from shorter market times and increased sales prices - it can also create quite a bit of anxiety for sellers who are afraid they won't be find an acceptable new home before their current home closes. This is creating a cycle in which progress seems nearly impossible. Buyers cannot buy, due to sellers who won't list because they cannot find a home to purchase, as a result of other sellers not selling. And so on and so on.
It can be an emotional roller coaster for sellers, separating themselves from their past and looking into an unknown future. Especially considering the current tight inventory market, but with the need for people to have a suitable home for themselves and their family - this deadlocked situation has given rise to a unique strategy for sellers who are also buyers.
Contracts contain a single line making the transaction contingent on the seller finding a replacement home. This line is known as a "Reverse Contingency." Inserting this clause into a purchase agreement with a buyer, makes the sale of the seller's home contingent on the sellers ability to find another home to purchase. This is opposite of a normal contingency clause that makes a home sale contingent on whether the buyer can sell their home.
So you've gotten a very attractive offer on your home, but you have yet to find your new home. No worries. Simply put in a reverse contingency clause requesting for the buyers to wait for an agreed upon amount of time, to sign the final purchase agreement so that you, the seller, can find a new home. Don't worry about where in the contract to highlight these points, your REALTOR® will help you with this. In doing this, you can score yourself more valuable time without losing your very serious buyers. When you find a home that suits your needs within the agreed amount of time, you simply remove the clause and sign the contract.
Keep in mind that you will need to determine the day the clock starts ticking on other contingency deadlines such as home inspections, pest inspections and so forth because surely, the clock should not start ticking until the seller has removed the contingency to buy another home.
If You Don't Find a Home During that Time?
No sweat. You can either stay in your current home - cancelling the contract, or negotiate a longer contingency period if the buyer is willing. If you absolutely need to move into a new home, you can also look into the option of arranging short-term or transitional housing, which has also become popular as it allows you to sell in a strong market while taking the time you need to find or even build your perfect house. This can include short-term renting or staying with friends or family.
What if the Parties Cannot Agree on a Contingent Contract?
At that point, the seller's best options are to either reject the offer or ask for a longer closing period such as 60 to 90 days. This is something to discuss with your REALTOR® if it comes to that point. With being in a seller's market with little-to-no inventory we've been seeing a trend of patient buyers, who are willing to wait for the home they want. So if your home is that for them, I'm sure they will be happy to work with you on coming to agreement.
Discussing these points upfront, and reaching a mutual understanding that is expressed in writing with all terms of the agreement, will save all parties a major headache or even heartbreak in the long run.
As always, it is important that you work very openly and closely with your REALTOR® throughout the buying and selling process. Your REALTOR® can walk you through the buyer demand for homes similar to yours and together you can determine if a reverse contingency is the right plan of action for you, on the road to reaching your real estate goals.
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