Lisa Johnson's House and Home - Articles on Home, Family, and Living

Lisa Johnson on Buying a New Home or House

Chapter 6: Contingent Buyers - Selling Your Existing Home

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October 1, 2003

When you put a deposit on a home, the sales representative will ask you if you are a "contingent buyer". These are buyers who must sell their existing home in order to buy a new home.

We were contingent buyers when we put our deposit down. I got the sense that builders see mostly trouble when dealing with contingent buyers. And as we would learn, contingent buyers do in fact cause problems.

Selling a home can be very quick, taking as little as a month, while others can take a year or more. On the other hand, by the time the builder opens up sales, they can complete construction on a home in as little as a few months.

If you were to put a deposit on a home on the same day the builder opened up for sales, and you were a contigent buyer, they would expect you to have sold your existing home in about 2 months time. They are not willing to wait and wait for you to sell. If it appears that you will not be able to sell before 30 days construction is scheduled to complete, they will drop you, and offer to sell you a different home.

It was May of 2001 that we put a deposit on a lot. The builder had just started pouring the slab that day. We had not sold our existing home, in fact, we didn't even hire a real estate agent yet. The sales representative required us to sign a form agreeing that if we could not sell our home by August, they would drop us. In addition, the representative wanted me to hire a real estate agent immediately, and that I would have to provide the representative with the agent's name and phone number, so that they could follow up regularly.

We hired a real estate agent right away, and began work on preparing our condo for sale. We had a lot of work to do, packing up all the junk, cleaning the carpet, fixing the dents in the wall, painting, fixing the plumbing, and we had to do it all in a couple weeks. We priced the condo competitively, but it was just slightly below what other units in our complex were going for. We had no choice, we had to sell immediately. It wasn't until about June that we got an offer. Finally, in early July, we went into escrow.

All the while, the sales representative was keeping in contact with our real estate agent to make sure everything was going as planned on our end. When the representative heard that we were going into escrow, she was surprised. She didn't expect us to sell that quickly. At this point, most of the pressure seemed to ease off. Though the representative still wanted weekly updates on the escrow process. Finally, in mid-August, escrow completed, and we sold the condo. This was about 45 days before the scheduled completion of our new home.

From what we learned, most contingent buyers don't have this kind of success. They cannot seem to sell their existing home fast enough. So the representative drops them from the sales process, and offers to sell them a home on another lot. Often, that lot is part of a later phase, and later phases are more costly than the previous phases. Many of our neighbors were contingent buyers who got dropped and moved over to a different lot.

So, you're wondering where we ended up staying after we sold our condo, while our home was still under construction? We stayed at a hotel. We stayed there for little more than a month-and-a-half. It was costly, but we were able to get a discounted rate for staying so long.

One of our neighbors put a deposit on a lot that was scheduled for a later phase. But because they were able to sell their existing home very quickly, they were able to buy a home in the current phase, for at a cheaper price. Actually, they didn't really want to do this. But they didn't want to spend the money to stay in a hotel for 2 months. As it would turn out, everything worked out well for them. However, they had picked out all sorts of customization options on that initial lot, and ended up with none of it.

If you intend to purchase a new construction home, first pick the general area where you want to live, that is ,which city or region. Then hire a real estate agent to sell your existing home. Begin that process before you put a deposit on a new home. The sooner you get this out of the way, the greater the chances you will buy the house that you want.

If you end up having to stay at a hotel while waiting for your new home to finish construction, it's actually a small price to pay. You figure the money you spend for 1, 2, or 3 months living in a hotel, is nothing compared to the happiness of having the home you love and enjoy. You may very well end up living in this home for 10 years or more. Go ahead and endure the few months of hotel stay.

Next:   Chapter 7 - Shopping for a Home Loan

Suggested Links

·  Tips on Buying a Home

·  HUD Homebuying Guide

·  Homebuying Consumer Info Center

·  Real Estate ABC

·  Home Buying Guide.com