If you need to sell your existing home in order to purchase a new home, you will be using what’s called a “home sale contingency.” Essentially, your offer to purchase the new home will be “contingent” upon your ability to sell the existing home. Although it is difficult to get sellers to accept this in a hot market, here are a few common home sale contingency terms to be aware of.
Deposits are required for all home purchase contracts. In many areas of Massachusetts, a 5% deposit is standard. Although you would get your deposit back if the deal falls through due to a contingency in the contract, sellers still like to see large deposits. It’s seen as a reflection of your commitment to purchase a home. Thus, for offers with home sale contingency clauses, consider putting down more than the minimum deposit amount.
You can’t expect a seller to wait around forever. Sellers who are willing to consider a home sale contingency will want some type of deadline for your current home to go under agreement. Given how hot the market is, the deadline will likely be short,…maybe one or two weeks. In most cases, your home should already be listed for sale or be ready for listing immediately upon acceptance of the offer on your new home.
Mortgage Commitment Deadline
In addition to the mortgage commitment deadline for your purchase of the new home, sellers will want to see a deadline set for you to receive a commitment from the buyer of your old home. This ensures that both transactions are moving along and likely to close on time.
Contingency Release Date
In the old days, home sale contingency terms would be open-ended and remain in place until closing day. What happens if a deal falls through on closing day? No one would be able to close and everyone would get their deposit money back. Nowadays, sellers are looking for some protection from that risk. Most will ask for a date on which the home sale contingency is released. This would usually be after the offer and commitment deadlines mentioned above. The important thing to know is that once the contingency is released, your deposit is at risk should the deal not close.
Summary of Common Home Contingency Terms in Massachusetts
Selling and buying a home simultaneously can be complicated. Both your offer on the new home and the one you accept on the old home should be crafted to protect your interests. Thus, it’s essential that you work with an experienced Massachusetts real estate attorney for both Purchase & Sale agreements. If you are buying or selling a home in Massachusetts, contact Martino Law Group for assistance.