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Buying a New Home on Contingency

Today we are talking about buying a home with a contingency offer, meaning: you already have a home and you want to buy another one while selling the one you already own.

This can be a good idea if you are trying to avoid three problems that could arise from owning more than one home: 1. Can you afford a second mortgage? 2. Will the bank let you do that? 3. How will it affect your lifestyle if you have 2 house payments for any length of time?

First of all, let’s look at some reasons you may be buying a home:

  • Downsizing for a smaller home or smaller payment: A lot of baby boomers are doing this, getting close to retirement. They have equity built up but don’t want the large home with the acreage to clean up anymore. They want more leisure and travel time.
  • Upsizing to a larger home: maybe your family is growing, I was recently out with a couple that had been searching for a few months and they changed their search to a 4-bedroom. I asked them why we are all of a sudden looking for a larger home, and their reply was we will have a new addition to the family coming in 7 months!
  • Changing jobs or school districts: This is also happening a lot. Moving for less commuting time to work. I currently have a pair of clients and the wife has to commute over 4 hours a day just for the kids with their school and activities. With the new house they will cut that by 80%, saving her almost 16 hours a week of driving and gas money!
  • Lifestyle change: I have clients who take care of their elderly parents and now that they have moved out with another family, they don’t need the large home with a separate apartment attached. In this case they are looking for a smaller home with horse facilities so their daughter can learn to ride.

As you can see, there are many reasons to buy a home to live in. These are just a few of the situations that I have personally witnessed recently.

The first thing you want to do is find a local mortgage broker that can analyze your situation and let you know what you can exactly afford.

Don’t be afraid, people do this all the time. You may be able to afford more than you think, you may have a large equity position in your current home.

Once you have an idea of what you can afford you can start looking around for the next home you want. The key to success is having a good plan in place with the right real-estate professional and mortgage broker in place to help guide you through the process.

The next step in getting a real-estate professional to help you list and market your home and help you find and negotiate the purchase of the one you want to buy.

Ask some friends or co-workers that have recently sold their home or just bought one. Ask for testimonials when you are interviewing different agents: I love to provide my past clients’ experience to future clients. It gives them peace of mind and assurances that they are in good hands.

Now the tricky part comes into play: your home is listed and you are getting some traffic and all of a sudden you see the perfect home! Let’s call our agent and schedule a time to view it and possibly write an offer.

It turns out to be everything you imagined, right price, right school district, right yard and right on the way to school and work. You put the contingency offer in and you get an accepted contract!

Next step: do your inspections and make sure it is the home you think it is. If it is, then you can order the appraisal and make sure the bank is also on the same page as you.

You have to make sure that you close on time and by this I mean BOTH properties. This is where it can be an adventure!

Typically when you write a contingency offer, you give a longer than normal closing date to allow you time to sell yours. These days in Tucson 35 to 45 days is the norm, a contingency offer may be 3 to 4 months or longer to close.

This will give you plenty of time to sell yours and allow you to take the proceeds and close on the home you want to move into. You may also have to speed up the process or slow it down according to the buyers of your home and the sellers of the one you are buying.

This is where the real estate agent will earn their keep and keep the transaction on track and on time. Think about new build homes that sometimes have 6 to 8 months lead time for the construction and financing. Timing is probably the most important issue to think about when putting yourself into a contingency offer.


John Harings is a Tucson Real Estate Broker at United Real Estate Southern Arizona who specializes in investors and residential real estate. Contact him directly to discuss your real-estate plans and ask him the tough questions: (520) 488-8363. 

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