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One of the most confusing and nerve racking scenarios that many homeowners will face is having to buy a new home while selling their current home. Homeowners who find themselves in this situation become concerned that they will sell their home very quickly and they will end up having to settle for a home that they don’t “love” or even worse, being homeless.
If you are going to be buying and selling a home at the same time and are having these feelings of uncertainty, fear, and anxiety, a potential solution maybe including a suitable property contingency in the listing of your home.
A suitable property contingency in real estate is a condition that can be included in a listing that means that any buyer who makes an offer on the subject property needs to understand that the sale of the property is contingent upon the sellers finding a property within a specified amount of time which is negotiable.
It’s important for sellers who are thinking about making the sale of their home subject to finding a suitable property understand the potential PROs and CONs to this contingency. In general, the more real estate contract contingencies that are included in a transaction, the more complex it becomes.
Below you will find out the PROs and CONs of a suitable property contingency in real estate as well as some other potential solutions to consider. By understanding the benefits and drawbacks of a suitable property contingency, you should be able to determine whether it makes sense to include in your real estate listing or not.
There are a handful of advantages of including a suitable property contingency in a real estate listing. Before deciding whether you should include it in your real estate listing, read on to find out what the PROs are of including a suitable property contingency.
The biggest benefit for a seller who includes a suitable property contingency in their real estate listing is that it eliminates a “forced” sale. While a seller can elect to not sell their home at the last minute because they haven’t found a suitable home, they are risking potential legal trouble if they didn’t have a suitable property contingency.
A suitable property contingency makes a buyer understand that the sale of the home they’re looking to buy is all contingent on the sellers finding a property they want to buy. If the seller doesn’t find a home within the specified amount of time that is agreed upon in the initial purchase agreement, a buyer can elect to back out of the deal or they can grant an extension to the suitable property contingency.
Since a suitable property contingency eliminates a forced sale, another huge benefit of including it in a real estate listing is that it greatly reduces stress, uncertainty, and potential rash decisions. Dealing with stress, uncertainty, and anxiety is one of the top challenges of selling a home when buying and selling a home at the same time, and including a suitable property contingency can help with this.
Recently while selling a home in Rochester NY, the buyers who also had to sell their existing home stressed to me their concern of their home selling quickly, not finding something they love, and having to settle for a home they really didn’t want to purchase. They were delaying the listing of their home because they wanted to find a new home first, which meant they would have to write contingent offers. I explained to them that most sellers would require a right of first refusal clause in their offers which would mean they could lose out on the home of their dreams because they hadn’t sold their existing home. They ended up deciding that including a suitable property contingency in the listing of their home was the best solution because it eliminated their fear of not finding a home they’d love.
While a suitable property contingency in real estate may sound like a win-win solution to buying and selling a home at the same time, it comes with a fair amount of drawbacks as well. Below you will find out what the CONs are to including a suitable property contingency in your real estate listing.
One of the biggest drawbacks of including a suitable property contingency in a real estate listing is that it reduces the number of potential buyers for a home. The primary reason why this is the case is because some home buyers will not be willing or able to wait for a seller to find a suitable property.
If your home is likely to be purchased by a first time home buyer, it’s more likely that they will be able to be flexible with the possession dates of your home because they may still be living with their parents or renting. If your home is not likely to be purchased by a first time home buyer, it’s more likely the buyers will need to have possession of a property sooner which would not allow them to wait for you to find suitable property. This may ultimately mean that they choose not to look at your home because they cannot wait or are unable to wait for you to find a suitable property.
Including a suitable property contingency in a real estate listing can result in a significant amount of wasted time, effort, and money. The reason this is the case is because a seller may find a buyer who is willing to wait 30 days for them to secure a suitable property, but the seller doesn’t find a suitable property within the 30 days. If a buyer is not willing to give the seller an extension after the 30 days, they’ve now wasted 30 days when they could’ve been looking at other homes and also potentially have wasted several hundred dollars completing various inspections of the property.
It’s important to keep in mind when including a suitable property contingency in your real estate listing that you do not expect a buyer to spend money on various inspections until you’ve secured a property. A top real estate buyers agent will strongly recommend to a buyer that they do not agree to complete inspections until after a seller secures a suitable property, however, some buyers agents don’t have experience dealing with suitable property contingencies.
Sellers who make their listing subject to finding suitable property are potentially decreasing their negotiating power. If a buyer is willing to work with a seller and accept a suitable property contingency, they potentially may view this as an opportunity to negotiate on the price of the home.
As a buyer and their real estate agent are determining how much to offer for a home, if there is a suitable property contingency included in the listing they may use this as a negotiating tool. For some sellers, this can mean they are going to accept an offer that is less money than if they were to not include a suitable property contingency in the listing.
A suitable property contingency is the only surefire way a seller can guarantee they aren’t “forced” to sell their home, however, it may not be the best solution. There are other options that home sellers need to consider that are potentially a better fit than a suitable property contingency. Below are some of the best options to consider instead of a suitable property contingency.
One very popular and common solution to consider instead of including a suitable property contingency in a real estate listing is negotiating a post possession, also referred to as a rent back, with a buyer. A post possession allows a seller to remain in possession of their home for a specified amount of days after a closing occurs.
A post possession is a good alternative to a suitable property contingency because it allows a seller to sell their home and have additional time to find a property upfront, while also guaranteeing a buyer that they will own the subject property. The amount of time it takes to sell a home varies but generally it takes a real estate transaction 45-60 days from contract acceptance to closing. This means a seller has the 45-60 days for the closing to occur and an additional post possession to find a new home.
The length of post possession is negotiable and can vary from a week to a few months. If a seller is able to get a 60 day post possession they theoretically have roughly 120 days to find a new home, which should be plenty of time. While a seller has post possession they pay a specific amount of money, per day, to a buyer. In most cases the daily rent is based on the buyers principle, interest, taxes, and insurance, which is frequently referred to as PITI, plus utilities.
Another option to consider in lieu of including a suitable property contingency in a real estate listing is seriously thinking about alternative living options. Most people do not want to move in with family, friends, or in-laws, but it maybe an advantageous move for a short period of time while looking for a new home.
This may mean moving twice, which is not something people look forward to. Moving can be stressful, time consuming, and flat out exhausting but if the proper tips for moving and relocating are followed it doesn’t have to be a nightmare. If moving in with a family member or friend means the difference in thousands of dollars in proceeds from the sale of a home, it maybe worth considering the alternative living options instead of including a suitable property contingency.
Buying and selling a home at the same time can be very complex. Including a suitable property contingency in a real estate listing maybe a great option for some sellers and not a great option for others. It’s critical that if you’re buying and selling a home at the same time that you consider the PROs and CONs of making your home sale subject to finding suitable property.
As you can see from the above information there are PROs and CONs to this contingency and it’s possible that one of the alternative options listed above is a better fit. Bottom line, before including a suitable property contingency in your real estate listing that you determine if it makes sense or not.
As you can see suitable property contingencies can be very complex. If you’re buying and selling a home at the same time in Rochester NY, you need to be aware of this contingency and the PROs and CONs that come with it. It’s important you have a top Rochester NY real estate agent working on your behalf so that you fully understand the intricacies of buying and selling a home at the same time. If you haven’t selected a top real estate agent in Rochester NY to sell your home, contact me and I’d love to discuss your situation in detail with you!
About the authors: The above article “PROs And CONs Of Suitable Property Contingencies In Real Estate” was provided by the Keith Hiscock Sold Team (Keith & Kyle Hiscock). With over 30 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.
We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.
© 2016, Kyle Hiscock. All rights reserved.
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