The prospect of putting an offer forward for a new house is always exciting. But what if you haven’t sold your own home? 

The general answer is that yes – you can put an offer on a house even if you haven’t sold your current property. This is what is sometimes called a “contingent” offer.

However, doing so can create extra complications if you’re not prepared enough. Things get worse when homebuyers do not communicate clearly with sellers and effectively “lead them up the garden path”.

In today’s article, we highlight everything you need to know about making an offer on a house before selling your home…

Is It Possible to Make an Offer on a House Before Selling Mine?

Yes! It is possible to make an offer on a house before selling your home. Many property buyers do so every day…

However, there are a few conditions that you need to bear in mind.

  • Are you genuinely in a position to move forward with the sale (and not waste the seller’s time)? Estate agents will refer to you as a “proceedable buyer”
  • How long is the chain?
  • Do you have an understanding of what the seller is looking to achieve?
  • Have you got proof of funds ready?
  • Do you have a “plan B” in place if you do not sell your house?

Factors to Bear in Mind Before Making an Offer on a House (if You Have Not Sold Your Own)

We would never recommend making any kind of proposal to buy a property without having your proverbial “ducks in a row”.

Here at Property Solvers, appreciating that you – as the buyer – would like the best possible deal, we always recommend putting yourself in the seller’s shoes.

We sometimes come across “tyre kickers” who feel it’s ok to make offers with any kind of plan in place for the sale of their own property – a practice that we do not think is fair.

Let’s go further into some of the factors worth thinking about…

Know Where Your Own House Sale Is

Know Where Your Own House Sale Is

Much will depend on how far you are along your own property selling “journey”.

If – for instance – you have recently listed your property, the estate agent has a few viewings lined up but no firm offers, we feel it wouldn’t be right to make offers on a new house just yet.

This is because there’s no real certainty at this early stage that a buyer will actually make an offer on your property.  There is also the chance that the offer may not be concrete enough.  Examples could include if the mortgage falls through, the property gets downvalued or, if you’re in a chain, there’s a collapse.

Conversely, if the bulk of the conveyancing work is done and your mortgage offer is approved, it would be reasonable to make an offer.  For the purposes of transparency, however, it’s still worth confirming with the estate agent about where you are with the ongoing sale.

Time for a Reality Check

Time for a Reality Check

It’s easy to think with our emotions when it comes to offering on the property – especially if there are other people interested.  But it’s worth taking a step back and thinking rationally about things…

  • Should your offer on a property be accepted, how ready are you to actually move?
  • If this is a joint decision, have you spoken to your spouse or partner to make sure they’re fully on board?
  • How will the move affect your work?
  • If you have children, have you made the necessary schooling arrangements?
  • Have you budgeted and planned for the move?
  • Have you made any plans (holidays, changing jobs etc.) that could affect your ability to purchase the property?
  • Are there any other practical considerations that you need to take on board?

Have Proof of Funds at the Ready

Have Proof of Funds at the Ready

One important step of a contingent offer is demonstrating your financial capacity to buy the property.

This is because, if the seller says “yes”, you need to be in a position to proceed quickly.

This comes in the following forms: 

  • Mortgage Decision in Principle (DIP) / Approval in Principle (AIP) – Having a pre-approved mortgage is critical as it shows the seller that you’re a serious buyer.  We usually recommend getting an updated DIP / AIP once a month as mortgage lenders can often have a habit of changing their lending criteria
  • Proof of Deposit – This is usually in the form of bank statements that will show you will have sufficient budget to cover the difference between the purchase price and the amount of mortgage
  • Cash Funds – Sellers will often look more favourably at buyers who can pay cash. This is because these types of buyers bypass the mortgage application process which can often delay sales by months.  This means that, even if you haven’t sold your existing property, you will still be able to purchase.

Although unlikely to be requested, it’s also a good idea to have the following prepared:

  • Sufficient funds required to complete the sale for costs such as Stamp Duty Land Tax (SDLT), legal and estate agency fees
  • Evidence of the Help to Buy finance grant
  • Your accounts (if you are self-employed or run your own business)
  • Evidence that you have recently been given sufficient funds as a gift or through probate
  • Evidence of an ongoing property sale that covers the required amount (and when the transaction will definitively complete)
  • Proof of finance source (particularly if you’re an overseas buyer)
  • Proof of dividends received, or the sale of shares
  • Official information regarding a pension pay-out
  • Documentation evidencing a cash prize or lottery win

Understanding Seller Expectations

Understanding Seller Expectations

Every seller has specific requirements and needs that are crucial to understand in order to have the best chance of getting your offer accepted.

Start by knowing the seller’s asking price to understand how much you can negotiate. Additionally, understand the seller’s timelines and evaluate whether it aligns with your plans to sell your current property. 

This is the time to be honest with the seller regarding your financial situation and intentions. Always put in an offer that you can fulfill.

Have a Back Up Plan

Have a Back Up Plan

It’s worth having a “plan b” should the sale of your current property fall through or you cannot access the funds to purchase the property you have made an offer on.

Much will depend on how keen you are to move forward as the costs of seeking out extra money can be high.

We’ll explore some potential strategies below…

Strategies for Making an Offer Without Selling Your Property

Below are some of the ideas worth considering if you find yourself in a position where you can’t sell your house but still wish to press on with the purchase of your next property…

Using a Bridging Loan

Using a Bridging Loan

This is simply a short-term loan that “bridges” the financial gap between buying and selling the new property.

The advantages include the ability to access finance within very short timeframes.  These loans are relatively customisable to your specific situation and can be processed without too much hassle.

The downsides are that the pay rates are notably higher than conventional mortgages – not to mention the arrangement, exit and extra legal fees.  You will be responsible for 2 mortgages that could potentially place you at risk of falling under financial distress or even repossession.

The lender will want to take a charge on the equity of the property. If your mortgage loan is too high, this may not be possible.  However, some people use other properties that may own to secure bridging finance.

Remember also that as you will be buying a second property, the stamp duty surcharge will be due.  However, in most cases, you should be able to claim a rebate of the extra cost once you have demonstrably sold your current property.

Engaging with a Quick House Sale Company

Engaging with a Quick House Sale Company

Sell House Fast or We Buy Any House companies like Property Solvers offer a quick and stress-free avenue for selling your own home.

Such companies will offer a convenient way to release cash fast with a quick turnaround time of a few days to weeks. This will enable you to purchase the property within even the shortest of deadlines.

What’s more, quick sale companies typically do not charge estate agency fees and will buy properties “as is” – thus eliminating the need for costly repairs.

The principal disadvantage is that you would have to be willing to accept lower than your expected value and most quick sale companies don’t give you a chance to negotiate. It therefore comes down to weighing up whether price is more important than speed.

Refinancing and Renting Out Your Existing Property (or Properties)

Refinancing and Renting Out Your Existing Property (or Properties)

If you have existing property holdings with sufficient equity, you may look into refinancing onto a buy-to-let mortgage and renting out the property.

This will enable you to keep the property and benefit from future price growth whilst also earning a steady income.

Remember that, as a landlord, you’ll face responsibilities like tenant and house management. There are also extra tax burdens these days that surprise many rental property owners at the tax year end.

Note also that buy-to-let remortgaging can take a few months (depending on the lender).  If there is not enough time, some buyers use a short term bridging loan if the seller has a tight deadline to work to.

Summary

You can put an offer on a house before selling your current one, but it comes with different challenges and considerations. 

Generally, you can increase your chances of success by having contingency plans and being transparent with sellers.  Much will also depend on the state of the local market.  If, for instance, there is not much demand for a particular property, the vendor may be more flexible.

Good luck!