According to recent data from the National Association of Realtors, 76% of homebuyers are repeat owners, the highest percentage on record. That means a large majority of homebuyers must consider the sale of their current home prior to buying a new one. After all, few people can afford to hold two mortgages.
At the same time, it usually does not make sense for buyers to sell their home without having a new one lined up to move into. So what options does that leave for the homebuyer who must also be a home seller?
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Most often, this type of scenario calls for a home sale contingency. With the help of real estate agent Jesse Allen, a single-family home expert in southern Indiana, we’ll help to explain the ins and outs of home sale contingencies, and offer additional alternatives for buyers who currently own a home.
Are there alternatives to a home sale contingency?
If a home sale contingency just isn’t possible for your deal, Allen says that there may be other alternatives.
Bridge loans
A bridge loan is a short-term loan that allows you to buy a new home before selling your current one. It “bridges” the financial gap by providing temporary financing until your home sells. While this option can be helpful, keep in mind that bridge loans often have higher interest rates and fees.
Allen says, “It allows you to keep your current home and your mortgage and then tie the new house that you’re wanting to buy into that. [The lender will usually] give you up to twelve months to sell your previous home, then they recast your loan amount, so that you go back to what your original loan payment would be on the new house. So, if you’re nervous about writing first rights or contingencies, a bridge loan [could be] a great way to avoid that whole conversation.”
Home equity line of credit (HELOC)
If you have significant equity in your current home, you may be able to take out a HELOC to cover the down payment on your next home. This option allows you to leverage your home’s value while avoiding the uncertainty of a home sale contingency. However, it’s important to note that you’ll be making payments on both your mortgage and HELOC until your home sells.
Negotiate a longer closing period
Instead of including a home sale contingency, you could negotiate a longer closing timeline with the seller. This gives you extra time to sell your home while reassuring the seller that your purchase isn’t dependent on the sale.
Make a non-contingent offer with savings
If you have enough in savings or can access other liquid assets, you might be able to purchase a new home without selling your current one first. While this option requires financial flexibility, it gives you a stronger negotiating position and reduces the risk of losing the home to another buyer.
Sell your home first and rent temporarily
Another option is selling your current home first and temporarily renting while you search for a new one. This ensures you have the proceeds from your home sale in hand, eliminating the need for a contingency. While this may put you in a better financial position when making an offer, you might have to move twice, which also has cost implications.
Buy before you sell
There are real estate solution companies like HomeLight that provide convenient programs that streamline the process of buying and selling a house at the same time. These “Buy Before You Sell” or trade-in programs can provide a bridge to help you successfully complete your move to a new home.
For example, HomeLight’s Buy Before You Sell program, available in most states throughout the country, allows you to purchase your new home and move in while getting assistance to sell your old home. Contact HomeLight for program details.
HomeLight also offers other services for homebuyers and sellers nationwide, such as Agent Match to find the top-performing real estate agents in your market, and Simple Sale, a convenient way to receive a no-obligation, all-cash offer to sell your home in as little as 10 days.
Other real estate companies that help bridge the process of buying and selling at the same time include:
- Flyhomes
- Orchard Move First
- Knock Home Swap
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Jesse Allen Real Estate Agent
Jesse Allen Real Estate Agent at Keller Williams
- Years of Experience 8
- Transactions 108
- Average Price Point $168k
- Single Family Homes 101
Conclusion: A home sale contingency offers peace of mind
Allen wraps up the bottom line well: “The biggest thing we always tell our clients is that we want to make sure that they are never homeless and they never have two mortgage payments at the same time. Because either one of those scenarios is ultimately the worst.”
While sellers may be hesitant to accept an offer with a home sale contingency, the reality is that many buyers today find themselves needing one. So in effect, while a seller may prefer an offer without a home sale contingency, they may never receive one. Therefore, you as a buyer should include contingencies –– including home sale contingencies –– that make the most sense for you. Consult with your agent on how to make the best offer with a home sale contingency, if you need one.
If you’re making plans to sell and buy a home in 2025, HomeLight can connect you with a top-performing local real estate agent. Our free Agent Match tool analyzes over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.
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