So you found your dream house.
The trouble is you need to sell the one you live in before you can buy it.
Putting in an offer and going under contract on a new home contingent on selling your current home can be pretty anxiety inducing. It can produce even more angst on the sellers’ end, as buyers are more protected by North Carolina Real Estate laws in these cases. Knowing the ins and outs of contingent sales can help calm those nerves and feel more confident in your decisions along the way, because you’ll know what to expect in every scenario. Enlisting the help of a Realtor ensures that you have a trusted and knowledgeable advisor in your corner to minimize risk and help you get from point A to point B (that dream house) as smoothly as possible. Read on for what you need to know before you sign that contract…
Edited January 2022: In a persistent sellers’ market, when inventory is low and multiple offers are a distinct possibility, a contingency can be a big hurdle and a deterrent for sellers when choosing an offer among many. Talk to your Realtor and mortgage professional about cash offer services or loan options you might qualify for in order to remove the contingency from your offer. If removing the contingency isn’t a possibility, talk to your Realtor about ways to strengthen your contingent offer!
If I go under contract on a new home, how long do I have to find a buyer for my existing home?
When you put in an offer on a home when your existing property is not under contract, your agent will include a Contingent Sale Addendum. In the event that your offer is accepted and you go under contract, you will have until the end of your due diligence period (usually 30-60 days) to find a buyer for your existing property. If your existing property does not go under contract by the end of the due diligence period stipulated in your contract on the new home, the contract becomes null and void. There is no need for the buyer or seller to terminate the contract. Earnest money deposits are returned to the buyer.
If my offer is accepted with a Contingent Sale Addendum, can the seller “kick out” my offer if a better one comes along without a contingency?
No. Some states have what is known as a “kick out” clause that allows sellers to “kick out” a buyer in favor of an offer with better terms if they do not remove the contingency within 3 days. At one time, North Carolina’s Contingent Sale Addendum contained this clause, but it has not been a part of the Addendum since 2011.
If my property is under contract by the end of the due diligence period, but it doesn’t close by the settlement date in the contract with the seller, who can terminate the contract?
In this case, the buyer has the right to terminate the contract and get their earnest money deposit back, as long as they terminate within 3 days following the settlement date in the contract.
In the above scenario, when does the seller have the right to terminate?
If the buyer does not terminate the contract within 3 days following the settlement date, and the buyer is unable to close on the sellers’ property within 14 days of the contractual settlement date, the seller may choose to terminate the contract. In this case, the buyer would lose their earnest money deposit.
What if my existing property is under contract on the effective date of my contract with the seller, but my contract falls through?
In the case that a buyer’s contract falls through on their existing property, they must notify the seller. At this point, either the buyer or seller has the right to terminate the contract, and any earnest money deposits are returned to the buyer. However, If the buyer is able to submit a second contract with another buyer, they would again be in compliance with the Contingent Sale Addendum and the seller would no longer be able to terminate the contract.
If the seller terminates the contract during any period when they are permitted to do so, what happens to due diligence monies?
Due diligence monies are only required to be returned to the buyer if the seller terminates the contract during the due diligence period.
While a sale contingency can add additional steps and sometimes obstacles along the road to your new home, know that you are not alone! Approximately 75% of home sales include a buyer contingency. Don’t let it deter you from moving forward…enlist a trusted agent to guide you through the process and minimize your risk. If you have your eye on your next home, and you’d like to find out more about what your existing home is worth and what it will take to get it sold, give me a call and let’s chat! 704-792-8768.