Selling a home can prove to be a nerve wracking process for many sellers, especially if you will also be buying a new home simultaneously.
Some of the biggest concerns and questions sellers have are:
- Will I be Homeless?
- How do I buy my next home if I haven’t closed on my current one?
- What if I can’t find a replacement property?
It’s a lot to take in, but don’t worry – if you find yourself in this position – this article will help!
The process of purchasing a new home with the condition of selling your current home/property is known as a “contingent purchase” as the purchase is contingent on you selling a property. The same goes with your sale as you will be selling contingent on purchasing replacement property. There are a lot of moving parts to a contingent sale/purchase as typically the goal is to close the sale and purchase concurrently. There are typically two title companies/Escrows involved, multiple agents and loan officers, multiple inspections, not to mention appraisers on both the down-leg and up-leg transactions (if there’s financing involved).
Are you getting acid re-flux yet? It can be complicated and drive you mad. Often, in an effort to mitigate all of this stress and complexity, sellers inadvertently make crucial mistakes that may actually complicate the transaction which add more fuel and stress. These are the top three most common mistakes made by contingent sellers.
1) Waiting to list your current property until you find your replacement home.
While at face-value this seems to be an ideal and smart strategy, it proves to delay the entire process (especially in hot and competitive markets).
Upfront, sellers feel reluctant entertaining contingent offers because there is a level of uncertainty as to whether your down-leg transaction (aka your current property) can and will actually close. Sellers want to be reassured that you can actually close the purchase. When you send a contingent offer and your property is not even on the market, sellers will interpret your offer in one of two ways: 1, You’re not serious, or 2, this will be a seriously delayed transaction.
Both of these make your offer substantially less appealing and more likely to be rejected. This will delay the process as you will be wasting time making offers which you will probably not be considered at all. Your offers are more appealing if you can demonstrate your current property is listed on the market. Its even more attractive if your current property is under contract (in escrow) and most attractive if it’s in escrow and the buyer of your home has removed all of their contingencies!
2) Pricing Their Listing Too High
Obviously, every seller wants top dollar for their property, and trust me, every listing agent’s chief aim to get the highest and best offer for our sellers. However, we cannot, ignore the mindset of buyers: every buyer wants a deal! So, when we market and advertise, we need to use psychology to drive buyers to your property. The more foot traffic and eyes you can get on your property, the higher the potential for multiple offers, the more offers we obtain on your property the higher we can drive the price! Makes sense right?
Pricing your home too high for your market or neighborhood will limit the amount of activity at your property diminishing the volume of offers and adding to your market time, again delaying the purchase of your next property. There is one caveat to this principle: if the condition, upgrades or amenities are far superior to those of your neighbors. Pricing your property just right is crucial to not only getting the best offers, but to moving the sale expeditiously!
3) Writing Low-ball Offers
As mentioned above, all buyers want a deal- and a commonly used strategy to get a deal is to write aggressive offers in the hopes of grinding a seller down on price. When you are a contingent buyer, you already have a large psychological barrier to overcome with the seller. They see contingent offers as “Delays” and their biggest doubt and question is – When will this deal close? Adding a low ball price to a contingent offers adds another layer of doubt in the mind of the sellers.
This will lead to a higher potential of your offer being rejected adding to your frustration. I recommend writing reasonable offers with traditional appraisal and loan contingencies, as well as a due diligence period to inspect and investigate. This will prove to be more attractive to sellers and will increase the likelihood of your contingent offer being considered.
Expedite the process of purchasing and closing on your new home by putting your current home on the market ASAP and pricing it correctly to obtain the best offer and terms- lock it down in contract. Then write reasonable offers on your replacement property with the adequate contingency period and terms.