What is the catch with contingent offers when I need to sell first?
Answered by Allen Markel, REALTOR®, Texas Premier Realty ·
Short answer
A contingent offer tied to selling your current home puts you at a disadvantage. Sellers prefer offers without contingencies because they avoid delay and the risk that your sale falls through. You may have to accept a lower price, waive inspections or the option period, or lose the home to a competing offer. The catch is that you are asking the seller to wait and accept risk while you solve your own problem.
Why sellers resist sale-contingent offers
When you make an offer contingent on selling your current home, you are asking the seller to take on risk. If your sale does not close on time, or falls through entirely, the seller's deal is in jeopardy. The seller could have accepted another offer without that risk. Because of this, sellers often reject contingent offers outright or demand concessions in return for accepting the risk.
Those concessions typically come in three forms: a lower purchase price, a shorter contingency period, or the waiver of protections that normally belong to the buyer. You may also lose the home to a competing offer that has no contingency at all.
The trade-offs you face
A contingent offer forces you to choose between competing goals. You want to buy the new home before you sell the old one so you move once instead of twice. But that convenience comes at a cost. The seller is unlikely to grant you a long window to sell, which means you may have to price your current home aggressively or accept an offer you would otherwise reject. You may also feel pressure to waive the option period (the inspection and repair-negotiation window) to make your offer more attractive, which removes your chance to walk away if the new home has problems.
Another trade-off: if you are financing the purchase, your lender may require proof that your current home is under contract or sold before they will commit to the new loan. That timing constraint can force your hand.
When a contingent offer makes sense
A contingent offer is sometimes the only option if you do not have the cash or the equity to buy first and carry two mortgages. In that case, the question becomes how to make the contingent offer as attractive as possible: a competitive price, a short contingency window, proof that your current home is already listed and actively marketed, and a pre-approval letter from your lender.
The right strategy depends on your timeline, your current home's condition and market, your finances, and how much you want the new home. Waiting to sell first, buying first with a bridge loan or cash, or putting off the purchase until your sale is further along are all options with different trade-offs. Talk to us to find the right option for your circumstances.
Common follow-up questions
Can I make a contingent offer without losing the home to another buyer?
Not always. If other buyers are competing for the same home without a contingency, the seller will likely accept their offer instead. Your contingent offer is weaker because the seller bears the risk that your sale falls through.
What if I offer a lower price to make the contingency acceptable?
That is one way to compensate the seller for the risk. You may also shorten the contingency window or waive the option period. The trade-off is that you give up negotiating power and buyer protections to make the deal work.
Does my lender care if my offer is contingent on selling?
Yes. Your lender may require proof that your current home is under contract or sold before they will fund the new loan. That timing constraint can force you to sell faster than you want.
Is there a way to avoid the contingency altogether?
Several options exist depending on your finances and timeline: buy first with a bridge loan or cash, sell your current home first and then buy, or list your current home before making an offer on the new one. Each has different costs and timing trade-offs.
Sources
Talk it through with Allen
A short call can turn a general answer into one for your address, your timeline and your numbers.
Related questions
Why would a seller accept my offer if it depends on my own home selling first?
A seller rarely accepts an offer contingent on your home sale because they risk their property sitting off the market while waiting for your sale to close. Sellers want certainty.
Read answerWhat happens if my sale closes but my new home purchase falls through?
Your sale closing and your purchase closing are separate transactions. If your purchase falls through after you've sold, you'll need a place to live.
Read answerHow do I time two closings on the same day without everything falling apart?
Timing two closings on the same day requires coordination between your title company, lender, and the other parties.
Read answerWhat does a move-up buyer's timeline actually look like from listing to keys?
A move-up sale typically takes several weeks from listing to closing, then another 1 to 3 weeks to keys.
Read answer
Answers describe transactions and public data. They are not legal, tax or financial advice.