Ideally, a homeowner would sell their property before investing in a new one. However, sometimes a situation arises where people find their dream property or deal and want to buy it before selling the home they are in.
If a buyer wants to purchase before selling their current property, a contingent contract can be applied. With this type of contingency in place, the buyer must sell their property before they are obligated to close on their new property.
This type of contract is risky for a seller but can really benefit a buyer who has found a property they want – but there are concerns for them, too. For the seller, the contingency is risky because the deal may never actually go through. If the prospect cannot sell their current home, they do not have to go through with the deal. This could mean the seller misses out on closing the deal as well as other potential offers. But if the seller requires that the contingency be dropped, a buyer may end up in a serious bind.
For instance, if the house doesn’t sell and they move ahead with the deal on a new property, the buyer could be in trouble. Many people do not qualify for mortgages for two homes, and funding for the new property could become a huge issue. Realtors have come up with legal documents to protect both the buyer and seller in contingent deals, but it can still be a precarious agreement to be involved in.
With the housing market heading up, many buyers are choosing to waive appraisal contingencies, which allows them to purchase a property at a price that is less than what the property is appraised at.
Many brokers do not recommend waiving the appraisal contingency because you are buying a house for more than it is valued at. Depending on which state you are in, there are papers to protect these ‘as is’ deals, mainly for the agent, where the agent and buyer specify that it was solely the buyer’s decision to make this above-value purchase.
While situations like this exist, buyers that purchased a property for more than the appraised value unfairly go after their realtor, despite the buy being their own decision. Buying properties ‘as is’ has been on the rise due to the current climb in prices in the housing market. The situation can be portentous for the agent and the buyer since the agent isn’t protected from future lawsuits and the buyer could run into a slew of problems with the property.
Without abiding by the appraisal, the new homeowner could encounter endless problems with the house and end up dealing with major problems and fishing out a lot of money to fix things.
If you are a unique buyer and either buying before selling, or surpassing appraisal contingencies and purchasing ‘as is’, these situations will probably be dynamic. While many will suggest against buying ‘as is’ or buying before selling, do realize that these situations are intimidating to most but could also end up working out really well. Talk to your agent and keep in mind what could happen in the future after making these sort of deals so you can make the right decision.