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  • How to overcome the "contingency offer" hurdle

    Tuesday, March 12, 2024   /   by Amy Brown

    How to overcome the "contingency offer" hurdle

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    There is a lot of fear out there and it is my job to provide solutions and answers to your concerns.

    Many of you need to sell your current home in order to buy your next one; that's completely reasonable! So let's tackle that hurdle!

    First of all, let's answer the question; why are contingency offers no longer accepted? It's not that they are NEVER accepted...it's that they are only accepted on properties that have been on the market for a looooong time, and are probably not the home that you are interested in anyway. 

    You are probably looking for a home with a mountain view, an accessory cottage for renting, located in one of the most walkable neighborhoods, or on a bigger piece of land. Well, the same thing that you are looking for...so is everyone else. That makes these homes highly desirable. And when they come on the market, they don't stay long.

    For this reason, sellers don't need to navigate the risk of a contingency offer which is dependent upon the sale of your home and leaves them at the mercy of your sale timeframe. They want to move on as well and they know that they can get their home under contract in less than a week. They also probably have their eye on a home in their next destination and need to cash out as soon as possible. So why take the risk?

    In the best case scenario by which a contingency offer MIGHT be accepted is if you already have your home under contract. Which brings us back full circle to; you need to put your home on the market!

    The Fear

    "I won't find anything that I like after I put my home on the market and then it will sell and I will have nowhere to go."

    You are looking today and finding plenty of homes that you like and maybe one that you love. The sad conundrum is that you can't do anything about it and now someone else is buying your dream home and you are still stuck in your current one. 

    The Solution

    That cycle will never end unless you do one thing; put your home on the market! Without the money to finance your next purchase, you will always be stuck in the same cycle; looking but unable to buy. That is a frustrating place to be. 

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    In comes our hero, the SELLER LEASEBACK. A seller leaseback is where you rent your home from the new buyer after the sale for a negotiated amount that is usually less than what you could find for a marketed rental. You are also able to rent that home on a short term basis instead of being locked into a lease. And even better, you only have to move once! This is a stipulation that we can put in the listing from the start.

    In addition, this can be a highly beneficial scenario for a new buyer as well. They might be in a similar situation where they need to sell a home in a market that may not move as quickly as ours but they have the funds or ability to borrow the funds to purchase now. In this way, they are receiving payments from you in order to supplement that funding for two homes while they sell their old home placing them in less financial burden.

    The Fear

    "I'm really uncomfortable leasing back my home for a designated period of time because what if it takes me a long time to find the next home that I want?"

    The Solution
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    A bridge loan! A bridge loan is often called a "buy before you sell" mortgage, though it is not a mortgage product. It is a short term loan, usually for 6 months to up to 3 years, that bridges the gap between selling so that you can go ahead and buy your next home using your current home as collateral.

    Using a bridge loan takes some planning though. You will need to go ahead and start the mortgage process and the lender will order an appraisal on your current home. Your lender will assess the equity in your current home, your credit score, and your debt to income ratio. Once awarded the funds, you are ready to search! Bridge loans do come with slightly higher interest rates due to their short nature, however, these loans offer flexibility and allow you to act quickly in a hot real estate market. 

    The Fear

    My home is already paid for or close to it and I'm not comfortable with the debt burden of holding a bridge loan.

    The Solution

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    Why not be rewarded for your excellent payment history and money invested in your current home! You can also use a HELOC, or home equity line of credit, to purchase your next home. An added bonus is that you can use some of these funds to spruce up your current home for sale. Once the sale is completed, you can pay the HELOC off. Or...maybe you decide to keep both properties! This is an excellent way to expand your investment portfolio and put your money to work for you!

    Don't be afraid of the current market conditions, instead be ecstatic with them! High demand for homes means that there will be a high demand for your home as well. In today's real estate market we need creative solutions to make things work so that we are comfortable with the trajectory of the sale, no matter if you are buying or selling or both. This is where I come in! I am here to help you navigate the ins and outs of the real estate market and to find solutions that work for YOU!
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