A bridge loan for a home purchase can sometimes help a buyer remove a home-sale contingency and make a cleaner offer.
That matters because a home-sale contingency does not always have to remain a home-sale contingency.
If you are a listing agent and receive an otherwise strong offer that depends on the buyer selling their current home first, it may be worth having the financing reviewed before your seller automatically says no.
What Is a Home-Sale Contingency?
A home-sale contingency means the buyer needs to sell their current property before they can complete the purchase of the new home.
From the seller’s perspective, that creates another layer of uncertainty.
Even if the buyer is well qualified, the transaction may depend on:
- Their current home going under contract
- Their buyer getting approved
- The appraisal working
- Their sale closing on time
That can make a contingent offer less attractive than an offer that does not depend on another home selling first.
Can a Bridge Loan Remove a Home-Sale Contingency?
Sometimes, yes.
A bridge loan for a home purchase is short-term financing that can help a homeowner access funds or equity from their existing property before it has sold.
The Consumer Financial Protection Bureau specifically describes bridge financing as a type of temporary loan that can be used when someone purchases a new home and plans to sell their existing home afterward.
Depending on the buyer’s situation, that can potentially allow them to:
Buy the new home first → move → sell their existing home afterward.
If the buyer no longer needs their current home to close before buying the new property, the original home-sale contingency may be able to come out of the offer.
What Does a Buyer Need to Qualify?
Bridge financing will not work for every buyer.
The lender still needs to review the complete financial picture.
Some of the biggest factors include:
- Equity in the current home
- Current mortgage balance
- Income
- Credit
- Available cash
- New mortgage payment
- Existing mortgage payment
- Bridge loan structure
- Expected proceeds from the eventual sale
Traditional mortgage guidelines can also require the lender to account for multiple housing payments.
For example, Fannie Mae generally requires a lender to document that a borrower using bridge financing can carry the payments associated with the current home, new home, bridge loan and other obligations.
So this is not simply a matter of saying, “They have equity. Done.”
We need to run the numbers.
Why Listing Agents Should Review the Financing Before Rejecting the Offer
Imagine your seller receives two offers.
One is lower but has no home-sale contingency.
The other is a strong offer at the price your seller wants, but the buyer needs to sell another home first.
It is easy to immediately focus on the contingency.
But what if that second buyer has:
- $250,000 of equity in their current home
- Strong credit
- Stable income
- Enough financial strength to purchase before selling
A bridge financing strategy may potentially turn that contingent buyer into a much cleaner buyer.
That can preserve a transaction that otherwise may have been rejected before anyone explored the financing.
Bridge Loans Can Also Help Buyers Compete
This strategy is not only useful after an offer has been submitted.
Buyers who already know they need to sell a home can sometimes explore bridge financing before they start writing offers.
That may allow them to shop with more confidence and potentially make offers that are not dependent on selling their current home first.
For buyers in competitive markets, that can be a significant advantage.
A Contingent Offer Is Worth One Conversation
Not every home-sale contingency can be solved with a bridge loan for a home purchase.
Sometimes the equity is not there or maybe the the buyer cannot qualify while carrying the additional obligations. Or sometimes selling first really is the right answer.
But if the offer is otherwise strong, it is worth checking before everyone walks away from a potentially good transaction.
Before Your Seller Says No, Send Us the Scenario
If you are a Utah listing agent and receive an offer contingent on the buyer selling their current home, send the scenario to Houzd Mortgage before automatically rejecting it.
We can review the buyer’s equity, income and available funds and determine whether there may be a way for them to purchase first and sell afterward.
If the numbers work, the buyer may be able to come back with a cleaner offer and give your seller more certainty.
It will not work every time.
But it is worth one conversation before your seller says no.