Most sellers in todays market may be more willing to do a contingency, that however may not guaranty you the home, both Buyer and the seller will have to negotiate how long the contingency will be and in most cases they will only give the buyer a 24 hour notice and first right of refusing the purchase if they " the seller" recieve s another offer, usually a better one and you do not release your sale contingency in the allowed time and continue witht he purchase , then the home would could go to the next buyer.
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The only way to safely consider that option is to contract the new property with a contingency that your home sells, as previously mentioned. This is your protection in case yours doesn't sell. However, the owners that will accept an offer like that will probably put some time stipulation on it, in which your home needs to sell.
I know of a family that purchased another home over 9 months ago, with the hopes of an immediate sale on their existing property. They have had no offers on their previous property and based on the mortgage balance, cannot reduce it low enough to sell. They can no longer make two house payments either. We have heard the same story time and time again.
So be very careful..
If you want to make the purchase contingent on a sale first, follow Marlene's advice. However, if the contingency gets rejected by the seller, walk. You do not want to be stuck with two homes, do you?
My advice: I would not go route #1; too risky and too potentially costly. There is a lot of inventory out there, and if the seller can't accomodate you in route #2, you certainly will find another property after yours has sold.