What is a Predicated Offer?

Predicated Offer

What is a predicated offer?

A predicated offer in real estate is one that includes a contingency giving the buyers time to sell their existing home.

For example, let’s say that you own a home in the Garden District. You’d like to downsize and buy a downtown condo, but you need the funds from the sale of your existing home in order to finance the purchase. You stumble across the perfect condo, but your house isn’t sold yet. Enter the predicated offer.

Essentially, you’re asking the seller to accept your offer and hold their property for you until you’re able to sell your own, telling them "wait for me, please". 

The pros of predicated offers

A predicated offer will allow you time to get your property sold and not miss out on the new place you want to buy.

The cons of predicated offers

The seller will continue to market their property and can, with the appropriate notice, accept another offer if you can’t remove your contingency. You may have spent money on inspections and even an appraisal, only to lose it all if another qualified buyer comes along.

How does that work? As part of the initial offer, buyers must lay out a time frame to remove the predication if another offer is received (usually 24-72 hours). It’s VERY IMPORTANT to note that when buyers remove the predication contingency, they are also removing all financing contingencies. That leaves buyers on the hook to perform, whether they can get a mortgage or not.

The best predicated offers

What’s most likely to get a seller to accept a predicated offer? Being able to provide them with a copy of an accepted offer on your existing home. It provides a level of comfort that your home is going to successfully sell and that you’ll be able to move forward with your purchase.

The worst predicated offers

What’s likely to get a seller to reject your predicated offer? Several things. Is your house not even on the market yet? Is it priced too high? Is it in a neighborhood that is historically slow to sell?

If you are buying in a hot neighborhood, there’s absolutely no incentive for a seller to accept a predicated offer. A seller’s market means that they can simply wait for the next offer that doesn’t have any contingencies beyond the norm.

Don’t try this at home

If you’re considering making a predicated offer, our advice is to use a professional REALTOR® to guide you. The pitfalls can be huge for do-it-yourselfers and you don’t want to find yourself out of both your deposit and the home of your dreams.

Need more home buying advice? Call us today at 504-327-5303 and we will be happy to earn your business.