Contingency Buyer?

chicagobride_07

DH and I have only been loosely looking to buy another property.  We currently own a condo and would plan to sell this, then buy a larger property (townhome or SFH).  We've gone to a few open houses and one of the listing agents asked us if we planned to buy on a contingency.  I don't understand the full implications of what this means.  Is it:

Scenario A: I am planning to buy House A, but still own house B.  My lender is telling me that I will not qualify for financing unless House B is sold, because my DTI ratio would be too high or I need to pull out a down payment from equity on the sale of House B, etc.  The lender's requirement is that I can submit an offer on House A, but will not get financed until House B is sold.

Scenario B: I am planning to buy House A, but still own house B.  I am fully qualified by the bank to own both properties at once, and I do not need to pull from equity on the sale of House B for a down payment on House A (have this as separate savings).  Even though I can get financing for House A, and can afford both properties, I am not comfortable for whatever reason with having 2 properties.  I, as the buyer, will submit an offer on House A, but will not buy house B until House A is sold (even though I can afford it).

Does this make sense?  So, can a contingency buyer be either scenario A or B?  Or is this something just driven from the lender?  Thanks for clarifying.

lil_jen051708

Both of those situations are contingency situations.  Contingencies are put in place by the buyer.  When you make an offer on a home you typically put in contingencies for financing and inspection.  If either of those don't work out (the inspection is so bad or your financing falls through) then you can back out.  In the same boat, contingencies to sell or close on the sale of a house are typical too.  We had a buyer for our house.  When we put an offer on our new house, we had the financing and inspection contingency and then also had one that we would have to close on the sale of our old house before we would close onthe purchase of the new one.  I did not want to be stuck with both homes if something happened to our buyers and they were unable to close.  That was our preference and we told that to our lender and realtor even though we would have been approved to have both mortgages at once.

lmdbww

I think it could be both, although I think the realtor was referring to Scenario A (that you cannot fully close on the new property without having first closed on your existing property for financial reasons).

 

stephm0188

It could be either really. A lot of sellers will only accept a contingency if they're still able to show and accept other offers. If another offer comes in, they would give you 48 hours (more or less) to find the financing to buy the house. If you can't securing financing within that time frame, you lose the house.

My husband swooped in and bought his first house from under a couple with a contigency. We did the same thing with our current house, although we didn't realize it at the time.