Knowing your dream home is in reach, but is contingent on selling yours can be worrying. We discuss the best way to make this dream happen for you.
Everyone’s situation is different when it comes time to sell a Minneapolis home. There are many instances where someone may need to buy a second home while still needing to sell their previous property. The process of how to buy a house contingent on selling yours in Minneapolis may sound complicated, but understanding the process and working with an experienced realtor can help everything to go smoothly.
Purchasing a house with the contingency of selling your current home is fairly common. This method helps to protect you from paying two mortgages at once. A game plan can be created by understanding the current market and your specific situation. This can put you in a good spot to get under contract quickly so that the sale of your current home can close, and you can move on with the purchase of your new dream home.
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What does House Contingent Mean in Real Estate?
A contingent offer can mean many things in real estate. At its core, it means that an offer has been made by a buyer and the seller has accepted it. However, the final sale is contingent on certain criteria that needs to be met. Buyers can add criteria about the appraisal, home inspection, mortgage approval, or selling a current home first. Contingencies protect the buyer from needing to go through with the sale if something goes wrong and also provides a way to ask for repairs or renegotiate the price if bad news comes back from the home inspection.
When planning to purchase a house, but needing to sell your current home first, you can place a “contingency clause” in your offer. This means that you will only go through with buying the new house if your current house sells. If it turns out that your house doesn’t sell, you can get out of your pending purchase. This will save you from carrying two mortgages at once. There are several ways to write this up in a contract.
- You will only move forward with the contract of the new home if buyers are found for your current home.
- If the agreed upon time passes and a buyer has not been found for your current home, the sale will not go through.
Home Sale Contingency Clauses
Whatever the reasons and scenario is for adding a home sale contingency clause, these can raise alarm bells for sellers. If all aspects of the contingency are not met, their home sale could fall through, leaving the sellers starting over in searching for buyers. This may make sellers hesitant to accept an offer with a contingency, so it’s important to make it a good and competitive offer. The state of Minnesota offers a Seller’s Handbook that outlines contingencies and some cities, such as St. Louis Park, require that all properties be inspected when sold. In addition to adding a contingency clause about selling your current home first, here is a look at a few others.
- An Appraisal: When inserting this contingency in the contract, it means that a third party will be hired by the mortgage lender to evaluate the fair-market value of the home. If the appraised value comes back as less than the sale price, this contingency lets you back out of the deal. Lenders will only put up a certain amount of money of the appraised cost, so this will save you from needing to come up with extra money for the down payment if the appraisal comes back as less than the offer.
- Financing: When making an offer on a property, a buyer needs the money to back it up. Adding a mortgage contingency specifies that the buyer has a specified amount of time to secure a loan that will cover the mortgage once the offer is accepted. If the buyer can’t secure the loan, they can walk away with the down payment. To prevent this from becoming an issue, it’s important to get pre-approved early in the process when searching for a home.
- Inspection: Perhaps the most important contingency, this one gives the right for buyers to have the home professionally inspected. If anything is wrong with the house, the contingency allows the buyer to either ask that problems be fixed, renegotiate the sale price, or back out of the deal. This protects buyers from blindly purchasing a home that needs major repairs. It is common for cities in the Minneapolis area to require property inspections no matter what. St. Louis Park is one such city that requires property inspections whenever a property is sold.
- Kick Out: The sellers can put a “kick-out” clause in the contract. This allows them to keep searching for buyers who will not be submitting a contingent offer and allows the seller to give you notice if they find another buyer.
How Often do Buyer Contingency Offers Fall Through?
It is inevitable that some contingency offers fall through. However, statistically, most contingent offers do work out. According to HomeGo, over the last two years, failed home sales rose from 1.4% to 4.3% of all listed properties. This is still a small number, but there are many reasons why some home sales do not go through as planned.
- Financial problems, like an unexpected job loss, new debt, or changes in lending guidelines could lead to a mortgage falling through.
- Unexpected problems may be found on a home inspection. If the issue is too major and the buyer and seller are unable to negotiate terms, the buyer may walk away.
- An appraisal that comes back lower than expected can cause a sale to fall through. Lenders will not finance for more than the appraised value, so if the buyer can’t pay the difference in cash, they may need to walk away.
- A buyer is unable to sell their current home within the allotted time and can’t complete the sale.
Make an Offer Contingent on Selling Your Property
If you have found a new property and would like to put an offer on it contingent on selling your current Minneapolis home, there are several things to keep in mind. First, you will want to put forth the best offer you can. Offer a price higher than your competitor, consider giving the seller a little extra time to move out, look into a bridge loan, include your current home’s listing with your offer, and include a handwritten note about what makes the new property a dream home for your family. These small details can make a big difference when trying to put in the best offer possible.
When you need to sell your current home quickly, you can easily take proactive steps to make your house attractive to buyers. This starts by making all repairs that could cause hesitation from a buyer. Also move out as many of your possessions as possible and don’t skimp on staging. Once the house is deep cleaned and staged, opt for high quality images and a virtual walkthrough to get buyers interested. Correct pricing is essential when trying to sell a house fast. Work with an experienced realtor to help figure out the best price for the market. They can perform a comparative home analysis to show comparable home sales in the area in the last few months. This will give you a great place to start. By setting yourself up for success with your current home sale, you can move forward with your new home purchase.
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Pending vs. Contingent – What’s the Difference?
When searching for homes for sale online, you may notice a few different labels. Homes may be “active,” “contingent,” or “pending.” If no offers have been accepted yet, the listing will say “active.” When a property is marked as contingent it means an offer has been accepted by the seller. However, the property is still active because the sale could fall out of contract if the requested provisions are not met. Once the provisions are met, the contingent deal will move to pending. When a property is listed as pending, this means that an offer has been accepted by the seller and all contingencies have been met or waived. Pending deals are not considered active and will stay in a pending state until all required legal work has been processed.
It is possible to put in an offer on a home that is marked as pending or contingent. In some cases, the sellers will take backup offers if the deal falls through. A few other contingencies may be utilized. Active-First Right states that if the buyer can’t match additional offers made on the house, the seller can opt out. Active-Kick Out states that if the buyer can’t sell their current home within the agreed upon time, the seller can opt out. If you find a home that you really love that is labeled as pending or contingent, get the help of an excellent real estate agent. An experienced agent can help you explore your best options for putting in an offer.
Sell Your House with TheMLSonline
When you find yourself dealing with a complicated real estate situation, it’s best to work with an experienced real estate agent, like our team at TheMLSonline Minnesota. We can help you buy a house contingent on selling yours in Minneapolis. We can also help you prepare a competitive offer for a home that is listed as contingent or pending. We are the best at matching sellers to buyers. No matter your situation, we will work hard to help you meet your goals. Be another delighted home seller and get the best price for your Minneapolis property by working with us at TheMLSonline Minnesota.
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