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
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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