When you decide to sell your home (for whatever reason), you might decide to use the money from the sale of your home to purchase a new one. This is a very sensible and do-able option, but there is one problem: Where do you live in the meantime? Staying in hotels and motels can get very expensive very quickly, and so that’s not a good option if you can find a better plan.
What Is A Sale Contingency?
That’s where the sale contingency agreement comes into play. This is just one of the many situations in which a home sale agreement might contain “contingencies.” In this case, you would put a “home sale contingency” in the agreement, saying that the purchase of your new home will not proceed until the sale of your old home is concluded. This will ensure that you have the funds to take care of business.
Home-sale contingencies like this are probably the most common, but there are other sorts of contingency agreements. For instance, many home contracts will include an inspection contingency. This means that the sale will not proceed until a certain inspection has been done, and it must be done according to the terms laid out in the contract.
How To Avoid A Sale Contingency:
Although these sale contingencies are great for the seller, they aren’t so great for the buyer. Up to this point, we have examined this question from the point of view of the seller. However, we also need to think about these matters from the perspective of the buyer.
A home with a sale contingency will normally be harder to sell, and it isn’t hard to figure out why that is so. When a person like yourself wants to buy a home, the last thing they want is a deal that promises an extra hassle. A sale contingency represents an opportunity for everything to go wrong and is better avoided. Here are some tips that will help you avoid this sort of challenging situation, whether you are the buyer or the seller.
Tip #1: Consider A Home Equity Loan
Let’s think about the root of this problem. The root of this problem is the fact that you need money for a new house, and your existing house is your only realistic source for that money. At this point, it might seem that your only option is to do a sale contingency agreement, but there is another way in which you can use the value of your existing home to purchase a new one.
This answer is a home equity loan. This is just a simple monetary loan in which your home is the collateral. As long as you have not begun the process of selling your present home, this option will probably be available. It does give you an easy way of borrowing the money for a down payment on your new home. However, it will mean an extra interest payment, and you also run the risk of losing everything if you default on the debt.
Tip #2: Consider A Government Loan
There are several government programs that give low-interest home loans to buyers who qualify. There are basically three types from which to choose:
All of these loans have different terms, but all of them are quite generous. Most of them offer low-interest rates and very low down payment amounts. In fact, the FHA loan requires no down payment at all! As an example, let’s look at the USDA’s single-family guaranteed loan program.
To qualify for this loan, you have to meet the income requirements. This loan is mainly intended to help those with lower incomes and/or bad credit. If those statements don’t apply to you, it might be better to look elsewhere. VA loans are great, although they are only available to veterans and some of their beneficiaries. As for the FHA loans, they are not that different from any other mortgage agreement, except that the terms are far more generous.
Tip #3: Consider Bridge Loans
It might surprise you to learn that most banks and financial institutions have a type of loan that is specifically intended for people who need to bridge the gap between an old home and a new one. These loans are called bridge loans, and they are particularly useful for those situations in which the new home is worth more than the old one.
Of course, this money is not free, and it’s not as generous as the government loans that we saw in the section above. You will have to pay interest, and there will be extra fees. In the end, you might very well end up paying a lot of extra money in fees. However, your home will probably be easier to sell without that annoying sale contingency.
As you can see, most of your options involve getting a loan to cover a loan. This can become a convoluted line of business, so make sure that you are savvy enough to keep track of everything and avoid the pitfalls that will be present. Before you think about doing something like that, you need to educate yourself as much as possible. Only by acquiring a lot of knowledge and exercising due diligence can you keep yourself from becoming entangled in the financial web that you are about to enter. If our article has given you a better idea of how to navigate this process, then we hope you will be grateful enough to fill out the contact form below.