Bump Clauses For Contingent Offers

big-house-palm-treesI have blogged several times about options for buying a new home before selling an existing home. An example is here.

Buyers often don’t want to sell first b/c they don’t want to end up homeless while they search for a new home, and in hot markets sellers won’t accept an offer that is contingent upon the sale of a current home.

When people hope to buy before they sell, they of course need to make sure they qualify for financing.

Options include bridge loans (which can be expensive), equity lines, renting out the current home for extra income to qualify, and putting as little as possible down on the new house to save cash.

The WSJ, however, recently had an article about “Bump Clauses” that make contingent offers more palatable. You can find the article here (we can send you key excerpts upon request as well).

Bump clauses allow sellers to enter into contracts while also keeping their properties on the market until buyers remove contingencies.

In other words, if the sellers get a better offer they can “bump” the original buyer.

If sellers get another offer, they must notify the original buyer. The original buyer then usually has a few days to remove contingencies or let the contract terminate.

Bump clauses are great for sellers b/c they allow them to keep looking for better offers. In addition, sellers can use the existing offer as leverage to cultivate higher bids.

Bump clauses are great for buyers b/c the clauses give them a viable shot at buying a home with a contingent offer with little to lose.

Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Department of Real Estate, DRE# 01524255, NMLS# 335646