Many sellers will leave my office after signing their contract and start scheduling appointments to look at potential homes to purchase. If they happen to find the right home too soon, it may be risky to proceed to contract until the purchaser of their home has received an unconditional written mortgage approval. By entering into contract on their purchase prior to this, they could be bound to complete the purchase even if the purchasers of their home ends up getting rejected on their mortgage . If they were counting on the sale proceeds to purchase, they will now be in a potential breach of contract thereby risking their contract deposit.
The above scenario can be avoided by adding a contingency in their purchase contract which makes their purchase contingent on the sale of their present home closing. In the mid 2000’s there was little chance of such a contingency being allowed into a contract. However, in today’s buyers market, many more sellers are willing to allow the purchaser such a contingency since at least they feel they have a deal moving forward.
Obviously it is safer if they had waited for their purchasers to obtain mortgage approval before purchasing, but it is human nature to want to start looking at homes as soon as they sign a contract on the house they are selling. My advice….make sure your purchase contract contains a home sale contingency.