Selling and buying a home
Selling a home and buying another at the same time requires a little more planning than buying without having a home to sell. It’s usually best to wait to make an offer until your current residence is under contract. That way you are in a better position to negotiate the terms of the new home. The purchase contract would still have a contingency for closing on the current property but the seller would be aware that it is under contract.
Contingency with kick-out clause
If circumstances make it better for you to make an offer on a home prior to getting your current home under contract, there is a contingency with a “kick-out” clause that is typically used in this situation. That means that the seller of the new home can continue to market that home. After an offer is negotiated with a new buyer, you are given a certain amount of time (usually 24-72 hours) to obtain financing to close without selling the current home, or terminate the contract. If you terminate, earnest money will be returned. If you continue, it’s typical for the seller of the new home to require additional earnest money. All terms of the ‘kick-out’ clause are negotiated in the original contract.
Due diligence period on contingency contract
It’s a good idea to have the due diligence period (time allowed for inspections) to start once the current home is under contract. This is especially important if there is a ‘kick-out’ clause since you will have to pay for the inspection, then the seller get another offer. If you are not able to obtain financing for the new home, the cost of the inspection would be wasted.
It’s easier to start your search early so you know what’s available, but wait till you home is under contract to make an offer on the new home.