Hello everyone and Welcome once again to another episode of the Selling Greenville podcast I'm your host Stan McCune realtor right here in Greenville South Carolina and if you need a realtor or you know someone that does reminder that all of my contact information is in the show notes text me call me send me an email however you want to get a hold of me and please if you like this podcast please give us a rating or a review it only takes a second I know some of you haven't done that yet that are regular listeners and I would appreciate that and make sure if you're listening to this for the first time or if you're listening to it kind of ad hoc here and there make sure you subscribe so you don't miss any future episodes I always remind you guys because we need to get as many subscribers as possible as many reviews and ratings as possible it helps me to grow the show today we are going to be talking about something that is a really important topic it's something that keeps coming up particularly this year as people are scared to make the jump from often times from their first home from their starter home to the next home and it is the topic of the home sale contingency now in case you're not familiar with that language here's what it means in the standard contract forms that we use here in South Carolina there is is a field for whether someone is trying to sell the home sell a home in order to buy their next home all right so you're making an offer on a home is that offer going to require you to sell the home that you're currently in that is if if it is required that is what we call a home sale contingency and the way it would work is let's say that you get under contract and this contract to buy a home is contingent on the sale of the home that you currently live in if the home that you currently live in does not sell then you can't complete the contract to buy and as such you would at that point get your earnest money back and be released of that contract based on the home sale contingency now you may have heard that it's a seller's market what happens when it's a seller's market well I'll tell you what happens sellers become picky about their buyers and at the end of the day don't want to have too many contingencies on the contracts that they accept on the home that they are selling the home sale contingency is one of the most difficult ones for a seller to accept because there are so many things that can go wrong right they have no control over the home that you as the buyer are selling and there are all sorts of things that can happen now let's say that the home that is being sold that that you are selling rather is also contingent on a home sale now you've got potentially multiple homes that are contingent on each other and there is so many different things that can go wrong and so when you're in a sell's market the sellers are going to be evaluating all their options they want the offer to be as clean as possible as few contingencies as possible and that's the situation that we find ourselves in so those that are trying to sell a home in order to buy a home need to understand that they're competing with a lot of other buyers that may not be trying to sell a home and those buyers are at the end of the day going to look a lot more attractive to the sellers of of the homes that are out there and so you need to understand that going in if you're in that boat where you might be looking to buy but you've got to sell your home in order for the numbers to work in order for you to get financing or in order for you to to be comfortable making your mortgage payments then you already have a bit of a strike against you as a buyer in a market that is really difficult for buyers now there are some degrees to this right I see it kind of as three three maybe four different levels of difficulty when it comes to making a contract contingent on the sale of home the most difficult one is when you've got a home that you're trying to sell and you haven't even listed it yet that is really a challenge and and you're really making it it difficult for your buyer agent if you are trying to purchase a home but you need to sell your home and you also don't have your home listed listen at the end of the day the vast majority of sellers are not even going to consider consider that offer they're not even going to consider it they're just going to say you know what there are other buyers out there that that either don't have a home sale contingency or have a home sale contingency on a home that's already under contract I'm just going to hold out for one of them and a good listing agent let's look at it from the other perspective I always encourage my clients look at it from the perspective of the other party if you are the one selling the home right and at the end of the day if you're in this situation where you're trying to buy a home and needing to sell a home in the process you're when you sell your home are going to be looking to mitigate as many risk as possible you don't want a risky buyer to be the one trying to buy your home you want someone that is going to be a clean buyer that's not going to have a lot of red flags that's not likely to fall through and so your listing agent let's say that you're selling a home and and you get an offer from a buyer and that offer is contingent on the sale of a home that's not listed your agent's going to have a lot of questions if I'm in in those shoes the first thing I'm asking is as a listing agent is okay give me as much information on this home that's going for sale as possible let me know I need to know what the address is I need to know what price it's going to be listed for I need you know any photos that you have any details that you have as possible what date it's going to be listed all of these things are relevant information to determine okay is this going to be a home that actually sells or is this going to be one that you know probably takes a while to sell and and we end up in a situation where maybe the whole deal with my client who's trying to sell their home ends up falling through because the buyer for their home can't sell their home right that's the situation that we have here with the home sale contingencies that makes it tricky there's so many things that can go wrong one of the things that a lot of people particularly down here in South Carolina don't like is these home sale contingencies that involve homes that are out of state that creates a lot of challenges I'm I'm dealing with this right now with some clients of mine that they may or may not be listening but they're selling a home in New York well guess what New York has a a lot of different laws it's an attorney state which means that they have multiple attorneys involved in closing and it creates a lot of challenges and makes it a lot harder to get to closing and and people down here that are selling homes they don't like to hear that you're trying to to sell a home in New York and that you need that deal to go through in order for your deal down here to go through that does not put set people's minds at ease if it's a home down here if you know you're trying to sell a home in Simpsonville and buy a home in Greer people will have a lot more confidence that it will actually work out that it will actually go through and honestly me as a listing agent I have a lot more confidence I understand the market down here I understand how it works I can go by I can look at the house see you know hey has the lawn been kept up has the house been pressure washed things that I can't see if it's a home in you know Nevada that's that's for sale that the contract is contingent on so there's all kinds of of different factors that go into this now as a seller you have at your disposal what we call a an option for a first R of refusal this comes in on a a form that we have here in South Carolina we callr stands for the South Carolina Association of realtorsr 504 that sounds like a a robot from Star Wars scr 504 but sr504 gives you an option as a seller and this could also be if you're if you're trying to again buy a home but you need to sell your home as part of it you may run into this form as part of as part of that deal all right because it gives sellers more confidence it it puts them a little bit more in the driver's seat what it does is it is it offers a first R of refusal which means this all right if the if you get under contract to sell your home and the buyer needs to sell their home in order to buy your home if you have agreed to the first right of refusal what happens is if someone brings another offer that you accept as the buyer that is not contingent on the sale of a home now you can force the issue with your current buyer with the primary contract we talked about backup contracts and primary contracts in previous episodes you may want to go back and listen to that I I did a couple of episodes on it back a few weeks ago but in this situation we have a primary contract that is contingent on a home sale and then someone brings a back of contract that's not contingent on the home sale now it sets into motion form 504 and it can form 504 can be written a few different ways but most commonly what happens the way it's written now is the primary buyer with the home sale contingency now has either 48 or 72 hours depending on how it's written and it can be more it can be less but often times 48 or 72h hour period to get their home under contract and and obviously if it's not listed then the first thing they need to do is get that thing listed get it listed but all it needs to be under contract by the end of that period and if it's not then that buyer has to to decide to prove that they can to to move forward without the home sale contingency in which case they could potentially be risking losing their earnest money if they're not able to buy it at the end either you know demonstrate that they can buy it that they have you know enough Finance ability so to speak enough ability to get financing that they can hold their current home and also buy the one that they're under contract for or basically they just have to say you know what we we've released this contract we're not going to be able to do this we don't have enough time or maybe they just run out of time to to get it under contract their home that they're trying to sell and and then the backup contract now becomes the primary we have this situation it it it happens not a ton but it happens in the case with with deals that I do you know maybe once or twice a year I run into something with this that's something that is again you might run into that on either side but I I strongly encourage my clients that are selling if we get a an offer that is contingent on a home sale that more or less unless it's just an offer that in other ways we just can't refuse like for instance if it was just like Asis or not going to do inspections whatnot then there could be some consideration there but otherwise almost all the time I'm encouraging my clients hey we really need to have a first R of refusal with this home in order to put you in the driver's seat in order to make sure that you're not in a situation as much as possible where this is just getting dragged out where we don't where we don't have control where the the seller is not serious or sorry your buyer is not serious about selling their home and you know they're overpricing it and all of that we want to make sure that that doesn't happen as much as possible this is one way to do that the only thing is that you still have to get that backup contract getting backup contracts is not easy so that's not a given but me as a realtor in that situation I will start to really Market the home as hey we have a first R of refusal we are accepting backup offers and people will see that and they'll be like you know what we might be willing to submit a a backup contract if the if the terms work for us that is and and and then you know if you're on the other side of the equation you're the buyer but you need to to sell your home in order to buy this home that you want you may have the seller on the other side require form 504 and so you need to be prepared hey that point you need to be serious about selling your home because you could be in a situation where the fire is put to your feet and you need to get your home under contract in 48 or 72 hours that that can be very stressful and I don't I don't prefer for my clients to have to go through that stress so that's not a form that I recommend if they are the buyer in that situation but again it is a sellers market so a lot of sellers are just going to require that right off the bat now selling a home that is listed but not under contract yet is kind of the next tier so let's say that you're trying to buy and it's you're purchased on a home is contingent on the sale of your home that you do have listed okay so that's good but it's not yet under contract we have to consider why it's not under contract so if I'm representing the seller in this situation I'm going to be looking why is this not under contract is it because it just came on the market okay well how many showings is it getting is it getting some activity what does it look like how does it compare to the other homes in that area is it priced correctly I'm going to do a lot of research on that if I'm representing the seller and try to figure out is this a good deal or not or is this going to be one where this house is likely to just sit for a while and again it's going to put my clients in a bad situation who are selling that they're going to have their home tied up under a contract that's never going to get to closing because their buyer is never ever going to sell the house that they need to sell so I'm looking at all the different options for why it isn't yet under contract and I've had situations where I've actually negotiated at that point if I'm representing if I'm the listing agent I'm representing the seller I'll actually negotiate with the buyers of like hey what I'm looking at here this home needs to drop in price by 10 or $15,000 and if you guys do that then we're willing to discuss the possibility for for accept accepting this offer and of course I I discuss this with with my selling clients first make sure that they're okay with this plan but but I'll go back to the buyer agent be like hey we if you guys are willing to lower the price then we can talk then we can consider your offer and and we'll respond to your offer at that time but but without the price coming down there's no way you've got it overpriced now here's where I need to to bring about a a side note okay so this comes up every every now and then sometimes people want to have one person represent them as a buyer's agent and one person and a and a separate agent represent them as the listing agent this is one of those situations where that's a really bad idea and in general I encourage my clients don't do that you want the same agent representing you on both sides even if both agents are like from the same office on the same team you can get two different opinions so that you know that listing agent let's say that you have a different buyer agent different listing agent and you're trying to do all this at once right you're trying to buy a home you're trying to sell a home your home purchase is contingent on your home sale now the buyer agent and the listing agent have to work together and the and there might be disagreements and there might be different styles for how they go about this so you know the listing agent might be like you know what I think we only need to drop the price 5,000 rather than 10,000 I you know I I really want I don't want to come down that drastically but the buyer agent is like listen this needs to come down $10,000 in order for them to have a shot at being able to to purchase this home with with a home sale contingency it might be the kind of thing where the listing agent isn't as responsive as the buyer's agent or isn't doesn't take it as seriously the listing agent doesn't have as much pressure on them they're in the sellers market so they you know they know at some point the home is going to sell unless it's like dramatically overpriced or unless the the sellers are unreasonable the buyer's agent is the one in the bad situation here where they're trying to figure out how to make all this work with the home sale contingency so I would tell my clients listen pretty much anytime you are trying to buy and sell a home at the same time and there's contingencies involved you really want to have the same agent represent you on both sides and if I'm doing listing presentations with potential clients I'll tell them that right off the bat I'll say Hey listen at the end of the day whether you use me or whether you go with someone else my that's up to you I'm not going to pressure you one way or another I'm not that type of realtor where I pressure people all all I ask is that you don't ask me to be your listing agent and then ask someone else to be your buyer's agent or vice versa you're going to lose out on that have the same agent represent both sides e I'm going to say that even if you decide that someone else is the better fit for you have them represent you as both your listing agent and your buyer agent and if they're like a a buyer Specialist or a listing specialist listen that just I know that that model exists out there it doesn't make a lot of sense to me because at the end of the day you learn best when you operate on both sides right I understand how to think like a seller better and and like a buyer better because I've been on both sides so as a seller I can think like a buyer as a listing agent I can think like a buyer and negotiate properly because I've been on both sides as a buyer's agent I can think like the seller and and present an offer that is attractive to the seller that concedes things that maybe aren't important to my buyer but would be important to the seller because I've represented clients on both sides you get someone that's a buyer specialist I have run into this where where I've dealt with with agents that are quote unquote buyer Specialists or listing Specialists where they where they don't do both sides and honestly they tend to not seem to have an understanding of the full process often times it's obviously there's a lack of training involved there but also there's just a lack of experience if you don't have experience on both sides of the transaction then you're going to have some gaps in your knowledge about how it works but to reel that all back in you're trying to buy a home and it's contingent on the sale of your home that's on the market but is not under contract again you should be asking yourself why is it not under contract and and what are my goals here how quickly am I trying to get it under contract how do I make this offer attractive to to the seller knowing that it's not yet under contract and there are ways that that that can be done I'm not going to go into all the weeds and on the details on that but at the end of the day you want to set their mind at ease and if you have a good buyer's agent your buyer's agent will reach out to the listing agent for the home that you're trying to purchase and will try to set their mind at ease will try to demonstrate that your home that you're selling it will sell it just hasn't sold yet because of XYZ now sometimes you might be in a in a situation to where you know what you can actually purchase your next home home and keep the other home that you have and so you might not actually need the Home Sale contingency but you want it you don't want to have to float two mortgages but if at all possible you want to try to have a simultaneous closing where you're selling the house that you're currently in and buying you know your next house all at the same time you you do have the option at your disposal of not having the home sale contingency and then trying to and and and making the offer so let Let me Give an example here let's say that you present an offer to on a house that you're wanting to purchase and you make a contingent on the sale of your home and the sers are just like nope we're not even going to consider that not even with with a first R of refusal you go back to the drawing table and you're like well you know what technically we don't need to sell our home and and so technically we could purchase this home we just need to sell our home pretty quickly right and in the ideal scenario it would we would sell the home first or at the same time as we're buying you could make an offer that's not contingent on the sale of your home and then make make that offer as long as possible which right now in this market a lot of sellers are not wanting offers to be longer than 30 days but it's kind of accepted in South Carolina to make it up to 40 45 days some sellers are okay with that and so you make it up to 40 45 days and during that time you get your home listed and you try to go ahead and sell your home and make all the dates simultaneously now this is this does expose you to some risk like I said you may end up having a period where you have two mortgages and and you need to be fully prepared for that scenario but this is a workaround option right you can get under contract to buy then list your home or then lower the price on your home or whatever needs to happen in order to get your home sold and then at that point then you are trying to to get your home under contract and trying to make that close on the same day as the home that you're trying to buy even though the home that you're trying to buy isn't contingent on that home sale in that situation I always recommend to my clients you need to get all your ducks in a row with with selling the home you need to get you know when I sell a home I get measurements done I get professional photography I go through and give a consultation for staging you need to get all of that in order taken care of prior to even looking at the homes that you're going to purchase because you need to be ready to get your home listed right away that particularly if you're in that that first boat that we talked about with the home that's not listed and then if it is the home that is listed and it's not under contract particularly if it's been sitting for a few weeks and it's not gone under contract at that point you need to be figuring out okay why is this not under cont contract what do we need to do to get under contract odds are it's just overpriced to be completely honest in this market if it's not selling it probably is just overpriced if it's a really really unique home you know like if it's an $800,000 home with a lot of really really unique features that home is going to need some time to sell so at the end of the day you're looking for a really unique buyer for that you're not going to be able to odds are I should say odds are I don't want to be overly negative here but odds are you're not going to be able to coincide those transactions but if it's a you know a standard you know Greenville County $250,000 home in good condition and whatnot in a desirable area and it's not selling the reason why it's not selling is almost certainly it because it's it's overpriced and or it needs work done on it and so you need need to consider what needs to be done lowering the price making some cosmetic updates making some repairs whatever the case may be in order to make sure that you get that home under contract in order to set yourself up to be able to to buy the next home and so those are all the the considerations that go in there but you do have a few possible workarounds if you have Financial flexibility some possible workarounds in terms of in terms of not needing to use the home sale contingency if a seller simply won't accept that and of course the the last tier here and this one's the best one if you if you are well really on either side right if you're the buyer trying to buy the home with the home sale contingency or if you're a seller considering accepting an offer that's contingent on the sale of a home it's if that home that is involved in contingency is already under contract and at that point if I'm the listing agent I'm asking again some questions okay how far along in the contract are we did did we did just go under contract has the appraisal been done are we through the inspection period what's the closing date all these different questions to see how firm is that contract I want to get as much information as possible I want a copy of that contract if I'm the listing agent I'm in some situations I've had to talk to the agent that is is representing the buyers involved with that home sale contingency not the buyers buying the home that I have listed but their buyers buying the home that they are trying to sell and so there's a lot of leg work that goes into that because here at the end of the day you need to make sure that one's solid because now scr form 504 no longer applies because you you can't have a first R of refusal when the home is already under contract the first R of refusal only forc is the buyer to get their home under contract but once their home is already under contract that form no longer applies and of course if you have specific questions about all of that I always have to recommend that you get an attorney have an attorney read that language and explain that but this is my Professional Knowledge from the times that I've been in the industry so at the end of the day if you're a seller and you get an offer that's contingent on the sale of a home that's an offer that you should consider but you need to see if there are ways to protect yourself you need to consider the offer holistically there's a lot of things to consider a lot of people just look at the purchase price but there's a lot more to consider than that how many other contingencies are there How firm is that home sale contingency if there is one if you're a buyer and you're wanting to make an offer contingent on the home sale you need to ideally get your house listed as soon as possible and get that thing under contract as soon as possible that's the way to ensure that that you're able to purchase the home that's the best way to ensure that you're able to purchase the home that you want and it's a challenging market for buyers right now but there are ways that we can get it done and if you need me to get it done for you as always my contact information is in the show notes I'm happy to represent you as your realtor as a buyer as a seller and if you're doing both hopefully both I hope to hear from you guys soon but until then stay safe see you next time