Buying a new home before selling your current one is risky.
But it is possible.
Read on to learn how it’s done, its benefits, risks, and more.
What is a contingent offer?
A contingent offer is a conditional offer dependent on an uncertain event.
It is the most common way to make an offer on a house when you haven’t already sold yours.
It often involves buyers needing to sell their properties before a buying another.
In other words, their buying of a new property is contingent upon the sale of their existing one.
It gives buyers time to market and sell their property while putting an offer on a new home.
If the buyer’s home sells in time, the contingent offer becomes binding.
Risks of contingent offers
While contingent offers can be a strategic move for buyers, they also come with risks.
Buyers may lose the new home if they can’t sell their property fast enough.
Meanwhile, the seller must keep the house off the market until the contingency is met.
Timeframe for contingent offers
A 4-8 weeks timeframe is reasonable for a buyer to list and sell their home. You can usually negotiate this.
What is a property chain?
A property chain is a sequence of property purchases reliant on one another.
This often occurs when buyers must sell their current home before purchasing a new one.
Buyers waiting for the sale of the previous home in the sequence to proceed with their own sale.
What is the property chain process?
Property chains begin when homeowners make offers contingent on selling their home.
If this seller has also made a contingent offer on another property, this forms a chain. The chain continues growing as each buyer awaits the sale of the previous home in the sequence.
Property chains need all parties to communicate and cooperate. If one link fails, it disrupts the entire chain.
How long are property chains?
The length of a chain can vary.
Short chains may involve two properties—a buyer and a seller.
Longer chains can have four or more properties in sequence.
Generally, shorter property chains are less likely to fall through.
What happens when a property chain breaks?
Breaking a property chain can have severe consequences.
It can jeopardize all the related transactions down the line. This leaves buyers and sellers stranded without a sale or purchase.
Everyone in the chain should keep their property in a saleable condition. And should communicate and respond fast to issues.
Good communication from estate agents is also vital in ensuring a smooth completion.
Who is responsible for damages when a chain breaks down?
Suppose you withdraw your offer without a valid reason. In that case, you may risk losing your deposit.
This covers the sellers’ costs for taking the property off the market.
Sellers must prove financial loss due to your withdrawal to claim further compensation. (This excludes lost deposits.)
7 reasons to make an offer before you have sold your house
1. Securing the home you want
In competitive markets, desirable homes get snapped up fast.
A contingent offer allows you to secure the property while giving you time to sell.
2. Gaining negotiation power
Sellers may accept a lower offer if it is contingent vs. waiting for a higher unconditional offer. This gives you added negotiation power over the houses selling price.
3. Selling your home under less pressure
Once you’ve secured your new home, you can focus on preparing and marketing your property. This can be done without an extended closing deadline.
4. Avoiding double moves
If timed right, you can coordinate closing dates and move straight from your old home to the new one. This avoids interim costs and hassle.
5. Testing the market
A contingent offer before listing your home gives insight into its market value.
6. Getting a head start
The buying and selling process takes time. Contingent offers allow sellers to search for property without worrying about living arrangements.
7. Motivation to sell
Having an offer accepted on your new home incentivises you to get your current house fast.
Contingent offers empower buyers to take the lead in purchasing your next home.
7 reasons to wait until selling your house before making an offer
1. Avoid overpaying on the new home
Once you’ve sold your home, you’ll know your price range for buying. This reduces the risk of overspending.
2. Prevent mortgage problems
Mortgage lenders will want to see that you have sold your current property first. This avoids uncertainties over whether you can secure financing.
3. Reduce pressure and complications
Waiting for the cash from your house sale leaves fewer contingencies during conveyancing.
4. Keep costs down
Paying double mortgages during the buying and selling can become expensive. It’s safer to sell first.
5. Complete renovations or repairs
Perhaps your present home needs work to maximise its value. In this case it is often easier to complete before purchasing another property.
6. Avoid rush decisions
Knowing you have already sold can prevent you from rushing into buying.
7. Simplify moving logistics
Coordinating the purchase, sale, and actual move can be highly stressful and complex. Selling first gives you one less thing to worry about.
The main advantage of waiting to sell your home first is minimising uncertainties and risks.
However, competitive markets could mean losing out on your dream home.
