| My first real job out of college was with a bank. After | | | | give him the ultimatum. 1) Walk away or 2) Remove |
| three years of work, I found myself in a miserable | | | | the contingency and proceed to closing. |
| position that somehow looked good before I took it, but | | | | Most of the time, Bob Buyer will walk away. Why? |
| within a week, I knew I had made a mistake. The | | | | Because he can't afford to go to closing with two |
| bank's policy on transfers was that you couldn't move | | | | houses. Thus, they have gained nothing by putting in a |
| within 9 months of starting a position. Fair enough. But, | | | | contract. In fact, it has cost them in 4 places. |
| that meant it was time to quit the bank entirely, as I | | | | 1) Because his offer was contingent upon the sale of |
| wasn't going to stay in that position for 9 months. The | | | | another home, Bob's offer was not very strong to |
| always intelligent words of my mother though, kept me | | | | begin with. He was unable to negotiate a good price |
| in my job longer than I would like. "Never quit your job | | | | on the property, and in the end had a contract that |
| until you have another one lined up." I guess I just want | | | | would have him pay $25,000 more than he might have |
| mothers all over the country to call their adult children | | | | gotten had he waited until he sold his house. |
| and tell them the same thing. "Don't buy a new house | | | | 2) Just because there is a kick out clause, doesn't |
| until you sell the one you've got." | | | | mean that Bob was able to avoid the cost of the |
| I will probably be cursed by Realtors all over town for | | | | inspection. He had to go through a home inspection |
| uttering these words of wisdom, but it makes a lot of | | | | and paid for it. Because he didn't get the house, that |
| sense in this market. Most buyers are prevented by | | | | money is wasted. |
| their lenders from making this error, but buyers are | | | | 3) Bob is required by the contract to make full |
| ingenious creatures, who, when left to their own | | | | application with a mortgage lender. This includes paying |
| devices, can find a way to make anything work, | | | | for an appraisal. The bank has to order it. Potentially, |
| especially when it means buying the home of their | | | | Bob might have to pay for more than one appraisal. If |
| dreams. Other assets can be pledged, income from | | | | Bob sells his house in 4 months, and does get to go to |
| potential sources can be viewed as guarantees, | | | | closing, the bank will require an updated appraisal to |
| once-in-a-lifetime holiday bonuses somehow translate | | | | show no downturn in the market. |
| into ongoing earnings. Most buyers are realizing that | | | | 4) Bob and his family had started moving into their |
| two mortgage payments are not a good thing. But | | | | new home mentally. Now, they are starting from |
| what about making offers to buy a house before you | | | | scratch. |
| sell your other. | | | | So, how can a Seller be assured that they will be able |
| When buying a new home, a buyer can make an | | | | to find a home they love when it is time to move? |
| offer that is contingent upon selling their present home. | | | | Keep an eye on the market. Working with an agent |
| The contract proceeds as normal in terms of home | | | | from the start and knowing what you want and what |
| inspections and applying for loans. However, until the | | | | is available at all times is imperative. Shop.... Keep |
| home owner sells their current home, they are under | | | | looking at homes with the idea that one of them MAY |
| no obligation to purchase the home they have a | | | | become your home down the road. When you get a |
| contract on. If the Seller receives another offer, he | | | | contract on your home you are selling, then move |
| cannot accept the offer until the first buyer walks | | | | forward. I have had clients who asked for a 5 day |
| away. This is accomplished by what is known in the | | | | contingency where the Seller has time to secure a |
| industry as a "kick-out-clause". This clause provides a | | | | contract on a property of their choosing. It worked out |
| Seller with the means to kick out a Purchaser's | | | | great. The Purchasers got to wait 5 days to start the |
| contract. Michael and Sally Seller have a home priced | | | | inspection period, while my Sellers got to find their |
| at $495,000. Michael and Sally Seller enter into a | | | | home, but otherwise the closing proceeded completely |
| contract with Bob Buyer for $490,000. Bob needs to | | | | normally. |
| sell his own home, and thus requests a contingency | | | | There is one big caveat to what I have said. If you are |
| clause to protect himself. Michael and Sally agree and | | | | a buyer who really can afford to have two |
| their house is "technically" under contract. However, | | | | mortgages, and you don't mind the thought of waiting |
| until Bob sells his home, nothing can take place. Brenda | | | | 6-9 months while you sell your first home, AND, the |
| buyer comes along, and, assuming the kick-out-clause | | | | new home you find is unique and offers features that |
| box in the MLS didn't scare away Brenda or her agent, | | | | are unlikely to be duplicated by another home coming |
| she sees the home and falls in love. She offers | | | | on the market, then seize the opportunity. Sellers will |
| $465,000- or $25,000 less than Bob, but... has an offer | | | | work with you to provide a flexible closing date, but |
| contingent only upon the home inspection. | | | | don't ask for contingencies. They just don't benefit the |
| Michael and Sally cannot accept the offer. Because of | | | | Purchaser in this market. |
| the kick-out-clause, they must first go back to Bob and | | | | |