It was once common to make an offer on another house that was contingent on the sale of your current home in order to close. For over 5 years since the downturn in 2008, contingent offers of this kind have been unheard of. Part of this had to do with so many owners with no equity or negative equity, and part of it was because average marketing time was months and months and few sellers wanted the entanglement.
All that has been gradually changing over the last year, and many sellers are again ready to entertain offers contingent on another sale. Recently we have been involved in three sell-and-buy transactions like this that were contingent on the buyers first selling their own homes. This is a strong indicator that the overall real estate market in our area is returning to a more normal function.
Why make a contingent offer? The reasons are simple:
(1) You need the equity in your current house to buy the new house.
(2) You cannot qualify carrying both your current mortgage and taking on a new mortgage.
(3) You want to make sure you have a place to go before you sell your home.
The challenge in this market right now is that homes are a lot easier to sell than to buy. Part of this is because of a strong sellers’ market, with demand continuing to outpace supply. A significant portion of the supply that is out there has condition or dating issues. Homes that are move in ready tend to go very quickly.
Not every seller will accept a contingent offer. Your offer needs to be strong and your sale price on your current home needs to be realistic so it will sell well within the current average day marketing time of 71 days. But, by lining up a contingent contract, you can smoothly move from your current home to a new home.