Timing Your Home Purchase
If you currently lease:
If you’re currently leasing, you’re probably hoping to time your purchase so that you don’t have to pay both rent + mortgage. We hear you!
There are 2 phases to purchasing a home: search and transaction.
Search: The search is when you are going on showings and negotiating any offers you have submitted. The search period is very variable based on inventory levels and how particular you are!
Transaction: The transaction is the period between offer acceptance and closing. This is less variable: it will be between 30 and 60 days. The closing date is a negotiation, and your agent will fight for the best terms for your scenario.
Typically, we recommend clients start looking in earnest 2-3 months before their lease is up.
If you have a flexible situation – maybe you’re able to move in with family, or your landlord will let you lease month-to-month – that is the most ideal. Try talking to your landlord about it – they may surprise you! You can also offer to pay a slight rent increase to sweeten the deal for them & give you more flexibility.
If you currently own:
If you currently own, you may want to put a home sale contingency in place.
What is a home sale contingency?
A home sale contingency adds a provision that your purchase of the property is contingent upon selling your existing home. The home sale contingency provides protection for you if you are not able to sell your current home, but it can make an offer less attractive to the sellers.
In the Multi-Board Contract, this is represented in Paragraph 30 by 2 contingencies:
- A date by which you must go under contract to sell your previous home
- A date by which you must close on the sale of your previous home
What should the dates be?
For the date by which you must go under contract on your previous home, you will want to choose a realistic date when you think you can go under contract.
For the date by which you must close on the sale of your previous home, this should ideally be at least 1 day prior to the closing date on your new property so that you have the funds to purchase your new property. You will want to talk to your lender & attorney about this!
Both of these dates will be specified in the contract.
What is a kickout clause?
The “kickout clause” is specified in Paragraph 30(c)(1). If the seller receives another offer to purchase the property, they will notify the buyer. Then, you have a certain # of hours (specified on line 420) to waive the contingencies in Paragraph 30. If you are able to waive the contingencies, then your purchase of the property will continue.
If your financing is contingent on the sale of your existing home, and the kickout clause is initiated, you will need to talk to your lender about options for purchasing the new property without selling your existing property.
The kickout clause can be 24, 48, or 72 hours. 72 hours provides the most time for you to figure out your financing.
2 ways to approach a home sale contingency:
|List your current property, & once it’s under contract, find a new home||Find a new home, & then list your current property|
|Pros: Presents a stronger offer to seller of new property: you’re already under contractYou are assuming less risk on selling your home, since it hopefully won’t sit on the market|
Cons: Shortens your timeline to find a new home – you may need a longer close, a leaseback, or an alternative living arrangement
|Pros: Provides more flexibility in finding your new property, especially if you are looking for a unique property|
Cons: Presents a weaker offer to seller of new property, since it’s possible your property may not sell May need to do pre-list prep, like decluttering, twice: once for photos/marketing, and then again once you actually list
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