Making Your Transition to a New Home Easier Using Contracts

You may not be able to plan precisely when you'll sell your home or when you'll find the perfect place for you, but with preparation and knowledge of the tools at your disposal, you will be in a better position to negotiate: after all, one of the goals when managing a transaction for moving up to a larger home is to have as little overlap as possible, saving you money in the process.

If You Find a New Home for Yourself Before Selling Your Old One…

1)  Longer Closing Period.  Price and all other terms being equal, offers with longer closing periods are usually less desirable for sellers than ones with short closes.  But as an agent, I believe it's important not to assume.  Sometimes sellers like longer closing periods because they're doing a 1031 Exchange or they're looking to upgrade too!  Understanding the needs of the seller is just as important as understanding your needs as a buyer.

2)  Sale Contingency.  It's possible to make the purchase of a bigger home contingent of the sale of your existing home.  This puts the burden of risk onto the seller.  The likelihood of the seller accepting an offer with this contingency obviously depends on the risk the seller is willing to take, the compensation being offered in return (if any), and how likely the seller believes they are to receive more attractive offers.

If You Find a Buyer for Your Home Before Finding a New One for Yourself…

1)  Longer Closing Period.  Many buyers are flexible about the actual day they actually get the keys to the house up to a certain point, usually around 30 to 45 days, sometimes more, sometimes less.  This period can be used to close on the upgrade home so that there's a relatively seamless transition.

2)  Rent-Back.  Of course, buyers ponying up hundreds of thousands if not millions of dollars for a Silicon Valley home are going to want to live in it sooner rather than later.  A rent-back clause allows you to lease the home from the buyer for whatever time period and compensation you both agree to.  This is a relatively clean way of buying more time to find and close on the perfect upgrade.

3)  Purchase Contingency Period.  There's nothing like a signed contract to put the picture of finality into people's heads.  And it's that finality that contributes to seller's remorse, which exhibits itself in the question sellers repeat to themselves, "What did I just do?"  A purchase contingency period specifies a period of time, usually days, when you as the seller can back out of the contract without penalty.  This period of time is used to identify a home or whether the type of home you want will be available to purchase.

4)  Closing Contingency.  This clause puts the burden of risk onto the buyer.  By including a closing contingency, you're telling the buyer that you agree to the sale, but only if you decide to purchase another house within a specified period.  If that period elapses without the contingency being lifted, no sale occurs.