Should I accept a
Contingent Offer On My House?
Should I accept a contingent offer on my
house? Let’s find out, right after this…
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I’m Kim Ward, Real Estate Advisor, with Horizon Real Estate in San Diego, California.
Should I accept a contingent offer on my house? That’s a common question for home sellers. A contingency is, a provision in a contract that requires the completion of a certain act or the happening of a particular event before the contract is binding. The top-three buyer contingencies are:
- Inspection contingency
- Appraisal and loan contingency, and sometimes
- Buyer home sale contingency.
Reality is that almost all home sales are sold with buyer contingencies.
Today we’ll be focusing on a buyer home sale contingency. The transaction is dependent, or contingent, upon the sale of the buyers home. If the buyers house sells by a specified date the contract moves forward, if it doesn’t sell by a specified date the contract may be terminated. How can this type of contingency affect your sale? when receiving a written offer that has the proper paperwork stating basically I’ll buy your property, but first I need to sell mine. How can you protect yourself from a lengthy time period waiting for that buyer to sell? First, have a deep understanding of the time period you’re agreeing to. Second, request detailed information on the buyers home sale, understand if it is;
- already in escrow, or
- is it listed on the Multiple Listing Service (MLS) for sale, or and this is the worst case scenario,
- is it not even for sale yet.
If the buyers home is not currently in escrow, meaning that they have a buyer who is working towards purchasing the property, then I recommend a lot of research be completed. The
research would be to learn how salable is the buyer home. The other thing to consider is if your buyers sale contingent offer is significantly better than any other offer you have you may want to consider accepting it. Just make sure you’re confident that the buyers property is well priced, and know your market to make sure there’s an opportunity for it to sell quickly.
Also, if the buyers home is not yet on the market make sure the buyer spells out when they will list their home and what the list price will be. It’s also nice if you can see photos of the buyers home. All of the above being said sometimes offers with sale contingencies are acceptable, for instance…
Quick story, I just helped Bill and Kim to accept a great offer! Full price, in four days on their home, and it is contingent on the buyers home. The buyers home was already on the market, already in escrow, so I gathered all the important information and shared that with Bill and Kim. Then we felt comfortable and confident that accepting. This offer had a very likely chance of the buyers completing the sale, like Bill and Kim’s buyer, if the buyer already has their home in the late stages of escrow, even better! Just make clear in the contract that if your buyers sale falls out of escrow you have the right to terminate your escrow with them.
If you don’t have any information about the buyers home, then you could really, REALLY, be getting into a situation! Because, we don’t know when the buyers property will sell. It’s possible for the sellers, your, home to be tied up for weeks and even months. Worse, maybe the buyers sale is contingent on the sale by his or her purchaser. A contingent, contingent offer to you! You are taking a risk by removing your home from the market to accommodate someone who may never be able to close the deal. You have to protect yourself in
this situation, the risk is WAY too high! in a situation with the buyer’s sale contingency, insist on a kick out clause. Accepting a contingent on sale of buyers home offer can also restrict your ability to market your house.
Once you’ve accepted a contingent offer most multiple listing service (MLS) require a change in the status of your listing from active to pending or contingent. Once this change is made your listing will no longer show up on any home search sites. Also most real estate agents will not show a contingent or pending home. That means you won’t be able to lineup backup offers who can step in if things fall through. So, if you would get a better offer for instance, you can’t accept it. Now, if you would somehow get a better offer you can accept it with the contingency of cancellation of your current buyer escrow. However, you must give your current buyer a right of first refusal. That means the buyer gets a limited time, perhaps 72 hours (that’s what’s common), to remove the contingency of the sale of their house. After that time period of 72 hours, and only then if the current buyer does not remove the contingency, you can terminate the agreement, return the buyers deposit, and begin the process of selling the home to the new buyer.
The California Association of Realtors Purchase Agreements, are filled with contingencies, and the forms often need additional language for individual transactions. You can use addendums to make sure that the terms of the sale are very clear. Just as real estate contracts must be carefully written contingency should also be drafted with great caution. Real estate brokers use forms written by attorneys. In the case of a contingency for the sale of the buyers current home, we would use a California Association of Realtors form contingency for sale of buyers property.
Whether, or not, a seller should accept a contingent offer depends on the facts and circumstances for each transaction. Of course, the goal is to sell the property with the best price and terms, and to do that sellers will likely be required to accept certain contingencies. Now that you understand the risks and stipulations associated with sale contingent offers you can make an informed decision on whether you want to accept the offer or not.
Have more questions? Ask me! my team and I are happy to help! Referring back to the story about Bill and Kim accepting their contingent offer… all is going well, and according to contract! I anticipate a successful close of escrow within a couple of weeks, and because Bill and Kim and I were careful, and made certain that the details of the contingent sale were in writing the sellers are able to protect themselves through the sale of their property! And into their new home!
I’m always thrilled to see questions, or comments, and if you found this of value grateful for your thumbs up! And don’t forget to subscribe! and click that Bell button! See you next week!