A Purchase Offer Without a Sale Contingency May Be Risky

Nov 15, 2022 By Susan Kelly

Many homebuyers are concerned about putting in an offer on a new house before getting their old one sold. Due to this, many purchasers add a house sale contingency in their request, giving them a safety net in the event their sale falls through.

But it's not always simple to buy a house with a contingency to sell. Because contingent offers to place the seller at the whim of the buyer selling their home first, many sellers are hesitant to accept them.

Does this imply that you shouldn't include a sale condition in your offer?

However, it's not always as simple as it seems. Many homebuyers want to add a house sale contingency in their offer that allows them a way out if their sale falls through.

In a seller's market, the seller has more negotiating power to demand a buyer who won't introduce a condition into the transaction.

Your level of comfort with the risks involved ultimately determines whether you make an offer without a sale.

The Situation Cause and Effect

In general, a property market with too many variables and risks results in a domino effect of halted sales. You can sell to buyer B as seller A (that would be you). Buyer B's performance depends on Buyer C because Buyer B is selling their home to Buyer C. If buyer C and buyer B cannot close, neither can you, seller A.

Why Contingent Offers Affect Sellers

Which do you think a seller will pick when given the option of selling to a buyer with a contingency to buy or a buyer without? Which one would you like?

Because there is a lot of uncertainty in selling a home, vendors naturally want to eliminate as many unpredictabilities as possible. In a seller's market, the seller will have more power to hold out for a buyer who won't introduce uncertainty into the transaction.

What it Means to Release the Contingency to Sell

Because of these factors, it could be alluring for a buyer to submit a purchase offer without a sale condition. By doing this, you might be able to purchase a new house without having to sell the one you already own. It might also signal that you're prepared to proceed under the assumption that your current property will sell—while merely accepting the slight chance that it won't.

You cannot keep from the seller that you cannot acquire without first selling your current residence. Contracts typically include some form of disclosures and good-faith dealings. This implies that you cannot deny important seller information. Anything that could cause the contract to fall apart would be considered.

Legal Danger

You may be held legally accountable for failing to complete the deal as promised if you submit an offer without mentioning a stipulation about selling your current residence. Apart from the usual contingency periods for appraisal, home inspections, or a financing contingency, there is no "exit clause" for the buyer without a contingency to sell.

Before making an offer without a sale contingency, you should speak with a lawyer and know the risks.

Monetary Risk

In this case, earnest money laws can vary. Therefore it's better to speak with a lawyer and assess your risk. Most escrow agencies, for instance, in California, will permit the parties to cancel the transaction, leaving the deposit in dispute if the buyer wants the promise and the seller does not want to release it. The cancellation form must be signed by all parties, though.

But one thing is sure: if you can't sell your current house, a sale contingency will safeguard your earnest money.

The possibility of making two mortgage payments and selling your home for less than it is worth are two additional financial hazards for buyers. Without one, you can feel under too much pressure to sell your house even if the offers you receive aren't reasonable.

Should You Make a Purchase Without a Sale Condition?

Whether or not you decide to make an offer without a sale depends on how much you are willing to risk. If you can afford two mortgage payments for a while, can get financing without a sale contingency, and can live without losing your earnest money, you may feel safe taking the risk to boost the desirability of your offer. Make sure you understand the risks involved before making the offer.

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