Buying Your Next Home
Agent & Price
Planning your next Destination:
When listing your home for sale and relocating to a different area, whether it’s local or long distance out of state, it’s best to start the discussion early on and have a plan in place. In most cases, many sellers must sell their existing residence in order to purchase a new property. This is called a ‘contingent sale’. In this scenario, the seller would still list their home as a traditional sale on the market and accept an offer from a qualified buyer, but would include specific verbiage in the counter offer ‘this sale is contingent upon seller finding suitable housing’. The buyer would still perform their inspections etc as usual per the contract agreement, but in this case the seller would not be obligated to close escrow until they have located a move-up property and concurrently close escrow on their new home. Typically, there will be a specific time frames set in place that allow the buyer to cancel the agreement and vice-versa should the seller for any reason not perform and can’t close on their new property.
When shopping for the new property, the seller (now buyer) will submit an offer including an addendum form: Contingency for Sale of Purchase of Other Property (COP). Used with California Residential Purchase Agreement and Joint Escrow Instructions (RPA-CA) form for either Buyer sale of property contingency or Seller purchase of property contingency.
This means if the seller on the new property accepts the contingent offer the buyer would be required to close escrow on their existing home prior to being able to purchase.
Additional Information from California Association of Realtors:
Contingent Sales: Using the COP:
Accordingly, a few reminders about using the COP may be helpful. First, for the purchase to be contingent upon the buyer’s sale of property, paragraph 4 in the California Residential Purchase Agreement (C.A.R. Form RPA) must be checked in order to incorporate the COP, which must also be signed by both the buyer and the seller to be part of their agreement.
When that is done, COP paragraph 1 makes the purchase agreement contingent on the close of escrow of the buyer’s property and identifies that property. Paragraphs 2 and 3 inform the seller whether buyer’s property is listed and if it is in escrow. If the buyer’s property is not in escrow, the buyer has 17 days to provide evidence to the seller that the buyer’s property has entered escrow or the seller may cancel. If the buyer’s property is in escrow and either party to that escrow gives notice of their intent to cancel, the buyer must notify the seller, in which case the seller may also cancel.
Additionally, if the contingency remains in effect and the buyer’s property does not close escrow and the seller has not received another offer on this property by the scheduled close date, then either party may cancel.
The seller can continue to market the property for sale and accept another offer, as a backup. If a backup offer is accepted, under paragraph 7.A, the seller has the right to immediately notify the buyer to (i) remove the contingency for the sale of the buyer’s property, (ii) remove the loan contingency, (iii) provide verification of funds to close without the sale of the buyer’s property, and (iv) comply with specified additional requirements, if any.
The purpose of having the buyer remove the loan contingency is so that the buyer cannot use the loan contingency as a “back door” for keeping the buyer’s property contingency alive. Verifying funds does not mean that the buyer must show they have sufficient cash to purchase the property but rather that the buyer has the ability to obtain a loan and the down payment without the sale of the buyer’s own property. The seller may cancel if the buyer does not complete those actions within the time specified, which is 3 Days. Although sometimes referred to as a “right of first refusal”, the process provided in this form does not describe a “right of first refusal” in the traditional and technical legal sense of the term, it is instead a contingency release clause.
If paragraph 7.B is checked, the seller can continue to offer the property for back-up offers but does NOT have the right to immediately require the buyer to remove the contingency for the sale of the buyer’s home. The seller will have to wait for a set number of days. During this time, the buyer can continue efforts to sell her/his own property.
Note that nothing in the COP delays times for the buyer’s performance in the RPA such as bringing in the deposit, submitting proof of funds, pre-approval or pre-qualification letters, inspection periods, and contingency removal.
If you’re not contingent upon selling first in order to purchase your new home and have been pre approved to buy without selling first you’re in a very strong position and can submit offers as usual.
When searching for your new home keep in mind what’s most important to you and your family. Is the reason you’re selling to be in a larger home as you simply out grown your home? Are your downsizing and prefer less maintenance, maybe from a single family detached to a smaller townhouse? Or is your job commute causing you to be closer to work, or need to be in a specific school district?
When shopping for your new home after you sold your existing home you will have a better idea of the market as recently experiencing on the other side as a seller.
At the Blumenfeld Group, we understand the local market trends and values of all neighborhoods in Southern California and offer a vast network of vendors to recommend that can assist with inspections, city and county data, school information, demographics, title map information whether it’s a primary residence or an investment property.
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