When real estate agents are looking at homes for their clients and see the language in the listing that says “subject to the seller finding replacement housing,” many will push delete. It’s typically, a turn-off for everyone involved, except the seller.
Selling a home contingent on finding another may seem like a great idea on the surface. The seller puts their home up for sale but makes it clear that it can only sell if they successfully purchase another home before the sale finalizes. Unfortunately, while this arrangement may prevent the seller from going homeless, it can also prevent them from finding a quality buyer. Selling a home contingent on finding another can backfire quickly, making it increasingly difficult to sell the house.
There is a surprising amount of leeway in how to sell a home, at least theoretically. Selling a home contingent on finding another property to buy means that if the seller fails to find a home for whatever reason, the sale does not go through. The buyer keeps their money, and the seller keeps their home; however, just because something can be done, does not mean it should be done.
Keep in mind that unreasonable demands are likely to send buyers looking elsewhere. Selling a house with this kind of contingency is not terribly reasonable and has no benefits for the buyer. It is the exact opposite of buying a home contingent on selling the one already owned, which is not terribly reasonable either. Attempting to put unreasonable contingencies into real estate contracts rarely works.
First, it wastes everyone’s time and money. Buying a home is not easy. It takes time to locate a good property, especially in the current low inventory market, which clearly favors the seller. Find a good real estate agent, someone trust worthy and well-known. Determine how much to spend, what is wanted and view a number of properties. Make and offer and hope it is accepted, before going over that property with a fine-tooth comb.
Buyers and sellers spend money on the home inspection, applying for a loan and more. It is difficult and emotional work that only becomes worthwhile at the end. But a buyer who agrees to a contingency never knows if they have actually purchased a home because of the contingency clause.
It takes a unique kind of individual to agree to such terms, and it is easy to imagine this type of contingency working in only rare circumstances. If the home was in extremely high demand, for instance, the seller might be able to find someone willing to go to the trouble. If the home is not something truly exceptional, however, selling on this type of contingency will almost surely drive buyers away. When buying a home, it is quite common to have a due diligence period of a couple of weeks to get everything in order. The buyer will be spending quite a few dollars to make it happen.
In hiring a home inspector, buyers can expect to spend around $500 depending on the inspector and all the types of inspections they do. Some of the more common inspections that take place during the home buying process include septic, water, mold and roof, in addition to a general home building inspection.
In applying for a mortgage loan, a buyer can expect to pay another few hundred dollars and maybe more on getting the mortgage application and the lender required appraisal.
Imagine standing in the buyer’s shoes, and it becomes fairly easy to understand why this type of selling contingency is frowned upon by agents. It makes an already stressful situation unworkable and is something to avoid. Subject to the seller finding replacement housing clauses increase the odds dramatically of finding the best buyer for the home.
For the vast majority of buyers who are out looking at real estate, they are probably coming from one of two scenarios. Either they have their current home under agreement or they have been renting.
In both circumstances, they more than likely have a deadline by which they need to find other housing. Trying to buy a home where the seller has made selling contingent on finding another property is going to be nearly impossible. Unless everything falls into place perfectly, the buyer is making a huge gamble of finding themselves homeless.
Next, these contingency clauses are not a good way to do business. Selling a home is a business transaction. Sellers need to think like a businessperson if they want to get the best results in this situation. Good business trades value for value – both parties feel like they benefit from the transaction and both walk away happy. The problem with selling a home contingent on finding another is that it focuses completely on the sellers needs and ignores the needs of the buyer.
In this type of market, plenty of other sellers are willing to be more attentive and offer a win-win scenario. Realtors and the buyers they represent will naturally steer clear of a property when they perceive it to be troublesome or difficult. Even if the buyer is unaware of the challenges presented as a seller, their real estate agent will speak up long before any deal is made. All of the expenses listed above may be necessary, but they might as well go toward a relatively sure thing.
Will a seller be able to find an agent who will agree to list the home under their terms of selling contingent on finding another property? Absolutely without question they will. There are some real estate agents that won’t give a second thought about doing anything a seller asks them as long as it’s not breaking the law. This willingness doesn’t mean it is a smart thing to do. A great real estate agent is going to go over all the pros and cons of the “subject to selling a home contingent on finding another” clause inserted in the multiple listing service.
More than likely the agent who says nothing and just agrees to doing whatever the seller wants doesn’t really care if the home sells or not. They are desperate for business and a way to make their phone ring. If they don’t sell the home, it doesn’t matter because they are using the property as a way to get buyer leads from the internet, sign calls and other forms of real estate marketing. They can then just go and sell other homes from the additional business the listing has generated.
It’s bad for the sale.
Being seen as unreasonable can have lasting damage to a listing and create somewhat of a domino effect. The more buyers and realtors come to avoid a property the more of a stigma it will develop. It will stay on the market longer, and the seller will be viewed as someone who does not really want to sell. This stigma can result in low ball offers and sometimes no offers at all. Eventually the seller will have to take the listing down or sell for a price lower than what they would have gotten in more favorable circumstances.
Creating barriers to a sale is almost as bad as overpricing a home. The longer a home remains on the market the greater the chance of getting lower offers.
Lastly, focus on the long game.
Just because a home sells before the owners have bought another one does not mean they will become homeless. If the seller needs to wait until the home sells before buying another, they can still figure something out. Some sellers move in with family or friends for a while before they find the perfect house, while others may decide to rent. Remember, especially those that have owned for a long time, renting is not the end of the world, especially with long-term plans in place.
Buying the next house should be something that they spend time on and consider carefully. Arranging for temporary living quarters can give sellers time to do the looking and shopping around necessary to find what they really want. They are not the only seller in this situation. Discuss options with each real estate agent interviewed to find out what other people in that situation have done. The real estate agent may have some excellent options in mind. Act fairly quickly during the transition period to get everything settled well, but plenty before have done it. In the end, the seller will become the buyer with the home they want and the sale completed. Hopefully, sellers have come to the conclusion that selling a home contingent on finding another home is not the best way to approach buying and selling real estate.
Call (951) 296-8887 and get the information you needed to make an informed, educated sound decision.
Questions regarding available inventory and/or other real estate matters please contact, [email protected] Mike Mason, Realtor® / Broker / Owner of MASON Real Estate. LIC: 01483044, Temecula Valley resident for 30+ years. 2011-2017 Board of Director Southwest Riverside County Association of Realtors.