It is tricky. It is challenging. It can be nerve-racking – Buying and Selling on contingency
How does contingency work in selling and purchasing a property? There are two possibilities. First, a property could go on market on the contingency that a replacement property is secured by the Seller prior to the execution of the contract on the sale of the property. Alternatively, the prospective Seller could purchase a property on the contingency that his property must sell first.
Higher mortgage interest rates do not slow down the changing needs of people. Families are growing, people are working from home, and some are retiring. Moving to a larger or smaller property may be desired and necessary. To feel comfortable with the change and perhaps to make it even possible, they may have to use the equity from their current home to purchase a new home. Some Sellers can make this happen by using a Home Equity Line of Credit (HELOC) to increase their cash-flow and secure a first mortgage loan for the remainder of the Price.
Does it work in a balanced market?
Today’s market is balanced between Buyer and Seller; however, inventory remains low, particularly for single-family properties. As a result, sellers can still succeed when a property is listed for sale with a contingency that a replacement property is secured. Some recent real-life examples can help illustrate the challenges and successes of contingency sales.
Successful contingency examples
A baby boomer owner in Hawaii Kai whose children had all grown into their own homes wanted to downsize, but they wanted the security of knowing where they were going. After some consultation and discussion, they decided selling on the contingency of securing a smaller one-level home was their best bet. With their savings and home equity, we were able to win a successful bid on a smaller home. While their home was on the market, we received an offer contingent on their closing on the smaller home. It worked!
A Hawaii Kai single-family owner wanted a larger single-family home in Hawaii Kai preferably with a home with an ohana or mother-in-law unit. The 3-bedroom 2- bath home received multiple offers even with the contingency that Sellers would take up to 60 days to secure a replacement property. It turns out that larger properties in Hawaii Kai especially with separate units, were in high demand as well! Fortunately, we found an off-market home, negotiated a contract, and closed the deal.
My client in Hawaii Loa Ridge wanted a larger home to combine the furnishings of a mainland property that sold with those in his Hawaii property. For financial reasons, we needed to sell the Hawaii Loa Ridge property to purchase a larger home on Paiko Lagoon. For personal comfort, we needed to secure the Paiko Lagoon property prior to selling the Hawaii Loa Ridge home. We entered a purchase contract on the Paiko Lagoon property contingent upon our sale of Hawaii Loa Ridge. It worked!
Contingency sales are not easy-they require cooperation and goodwill on the part of all parties: Buyer, Seller Realtors, Bankers, Loan Officers, and Escrow Officials. These types of sales can be very challenging, but I have become quite an expert at them to get results for my clients. So, please give me a call to discuss your goals and we can determine if a contingency sale might be right for you!
As always, I love to hear from you! Please don’t hesitate to call!
Thank you,
Judy
