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Old 08-05-2007, 05:30 PM
 
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Hi all,

Is there any point on making an offer on a home under a possibly contingent contract? We would be cash buyers, but don't want to wait for weeks to see if the matter gets resolved.
Thanks!
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Old 08-05-2007, 06:52 PM
 
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My understanding of a contigency contract is this, you make the new offer, the seller gives the other offer a short time period to take out the contigency, OR they can just out and out cancel the first offer.

Either way, a cash offer I think would be highly enticing to the seller.

I say go for it as from my understanding I don't think you would be waiting weeks or anywhere near that.

Could be wrong though.
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Old 08-05-2007, 08:46 PM
 
Location: Lehigh Valley,PA
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Quote:
Originally Posted by MovingIL View Post
Hi all,

Is there any point on making an offer on a home under a possibly contingent contract? We would be cash buyers, but don't want to wait for weeks to see if the matter gets resolved.
Thanks!
MovingIL,Are you using the services of a Realtor? The reason I ask is that they can better advise you when making an offer to purchase. There are different types of contingencies.

1. Inspection Contingency-the most common type of contingency allows you to investigate the desirability and condition of the property to your satisfaction. For example, you might get a professional inspection, hire a structural engineer, obtain estimates on any repairs or upgrades you'd like to do during this period.You can decide to back out of the agreement if the condition of the home requires extensive repairs that you are not willing to accept during this period.

2. Sale Contingency-People relocating or moving up to a larger home often want a sale contingency which makes the purchase of their new home contingent on the sale of their previous home.

3. Financing Contingency- which of course is not your case since you are offering cash. This allows you time to obtain a commitment from a lender to finance your home purchase.

Contingency contracts can also contain a "kick out" clause. This means that if someone else makes an acceptable offer on the same home you have chosen, then you have a short time, generally 24 to 48 hours, to make a decision. That decision may be to allow your contingency contract to be "kicked out" or, you may enter into a contract amendment agreeing to remove the contingency language and agree to come to closing on the date in the contract.
Hope all this information helps.
Good luck!

Last edited by cstellar; 08-05-2007 at 09:13 PM..
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Old 08-05-2007, 08:58 PM
 
Location: Woods of Missouri with many Critters
25,441 posts, read 8,974,993 times
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Default Cash buyer

Quote:
Originally Posted by MovingIL View Post
Hi all,

Is there any point on making an offer on a home under a possibly contingent contract? We would be cash buyers, but don't want to wait for weeks to see if the matter gets resolved.
Thanks!
I take it you are considering making a cash offer on a home that already has an offer (contract) on it, but is under a contingency, such as financing, inspections, etc.? If this is the case, you agent, if you are working with one, can contact the other company and submit your offer. If the first offer (contract) has a 'kick-out clause' of usually 72 hours, then you should not have to wait for any unreasonable length of time for an answer one way or the other.

Good luck to you.
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Old 08-05-2007, 11:04 PM
 
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I'm going to assume that the "contigency" on the other contract is related to the buyers sale of their own home. You really didn't specify. If that is the case, you should find out from your Realtor about the terms of the contingency.

In my neck of the woods, it was standard to have what I call a "put up or shut up" time, anywhere from 48 to 72 hours. It meant that the buyer had that amount of time to either get rid of their house sale contigency and proceed with the purchase or back away from the contract if another non-contingent contract was presented from a different buyer.

If that is the type of situation you are facing, I see no problem with presenting an offer. We did it years ago on a house and ended up buying it. The contingent buyers were not able to perform (i.e., remove the contingency) so they went away.

If you happen to be speaking of financing or inspection contingencies, that is a common situation. I'm not used to seeing any kind of "put up or shut up" time attached to them in realtion to the presentation of another offer. They usually have a required date assigned to when the financing and/or inspections need to be signed off.

I would also not want to purchase a house without an inspection contingency or a financing contingency, if I was getting a loan, so my offer wouldn't be any better in the contingency area, anyway. So, it is likely that those issues aren't the ones you're referencing in your post.

Anyway, good luck with your decision.
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Old 08-05-2007, 11:29 PM
 
88 posts, read 248,832 times
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Thanks for all the replies so far!! This is very useful. I will try to find out what kind of a contingency it is...
And yes, I would still want an inspection contingency, even though I am a cash buyer
The situation is actually quite complicated: I haven't seen the house in person yet, but have observed the market in the area for quite a few months, and this house looks like a very good deal (I also found out the seller just bought the place a couple of years ago, for just a few thousand below the asking price - so I wouldn't be surprised if he got caught in the interest mess).
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Old 08-06-2007, 09:48 AM
 
Location: Grand Rapids Metro
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Quote:
Originally Posted by garth View Post
I'm going to assume that the "contigency" on the other contract is related to the buyers sale of their own home. You really didn't specify. If that is the case, you should find out from your Realtor about the terms of the contingency.

In my neck of the woods, it was standard to have what I call a "put up or shut up" time, anywhere from 48 to 72 hours. It meant that the buyer had that amount of time to either get rid of their house sale contigency and proceed with the purchase or back away from the contract if another non-contingent contract was presented from a different buyer.

If that is the type of situation you are facing, I see no problem with presenting an offer. We did it years ago on a house and ended up buying it. The contingent buyers were not able to perform (i.e., remove the contingency) so they went away.

If you happen to be speaking of financing or inspection contingencies, that is a common situation. I'm not used to seeing any kind of "put up or shut up" time attached to them in realtion to the presentation of another offer. They usually have a required date assigned to when the financing and/or inspections need to be signed off.

I would also not want to purchase a house without an inspection contingency or a financing contingency, if I was getting a loan, so my offer wouldn't be any better in the contingency area, anyway. So, it is likely that those issues aren't the ones you're referencing in your post.

Anyway, good luck with your decision.
That's also called a "Right of First Refusal" for the first contract offer. But in the Grand Rapids Association of Realtors, Right of First Refusal is not allowed (the seller could be liable for paying both buyer's agents even if only one buyer purchases the home). Definitely check with your realtor, who should know the local board rules and regs. To me (at least in this area), a contract on a home that is contingent on the sale of the buyer's current home is useless piece of paper.
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Old 08-06-2007, 10:35 PM
 
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Quote:
Originally Posted by megellan
But in the Grand Rapids Association of Realtors, Right of First Refusal is not allowed (the seller could be liable for paying both buyer's agents even if only one buyer purchases the home).
megellan,

I'm just curious. With a contract contingent on the sale of the buyer's home, how could the seller be liable for paying both procuring agents, the one with the contingent buyer and the one with the new noncontingent buyer?

The one who brought the buyer who was unable to perform until they sold their house may have brought a willing buyer, but they didn't being an able buyer. As you called it a "useless piece of paper," it is useless until they sold their home, unless they opted to buy the house without selling their existing home . . . and that's the option they were still given with the 72 hour right of refusal. If the buyer failed to exercise that option, they remained an unable buyer so the associated Realtor didn't fulfill their obligations and therefore doesn't deserve a commission.

As for the second Realtor, they brought a willing buyer and an able buyer, but everyone went into the offer with the knowledge of the existing right of first refusal. I still don't see the second Realtor deserving any commission should the contingent buyer exercise his right and go forward with the purchase. The condition was known to all.

At least that's how I see it and that's why I don't understand your Board's position. A contract contingent on the sale of a buyer's existing home still gives the seller more of a possibility of a sale than no contract at all, no matter how large or small that possibility may be. To disallow it works against the benefit of all parties.

Let me followup with another question. What happens when someone comes into your area and wants to make a contingent (sale of home) purchase offer? It is a common thing elsewhere in the Nation. Does a Realtor refuse to make the offer?

If the answer is, "yes, they refuse to make the offer," it remains that a contingent offer not an illegal thing to do under the laws of the state . . . or is it? As far as I can tell it's just against the policy of the Realtor's associaiton. They don't make laws. Can the buyer than just fire the Realtor upon their refusal to represent his interests and make the offer directly to the homeowner or the homeowner's agent?

Under that condition, the buyer's ex-Realtor shouldn't be deserving of any commission because they refused to represent the interests of the buyer and failed to act in their benefit. The Seller's Realtor also has the obligation to present all offers to their client, no matter how they may see the offer. That's how I see it, what do you think would happen?

Last edited by garth; 08-06-2007 at 11:06 PM..
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Old 08-06-2007, 10:44 PM
 
Location: Mass.
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umm, what??
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Old 08-07-2007, 10:04 AM
 
Location: Grand Rapids Metro
7,301 posts, read 11,240,756 times
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Quote:
Originally Posted by garth View Post
megellan,

I'm just curious. With a contract contingent on the sale of the buyer's home, how could the seller be liable for paying both procuring agents, the one with the contingent buyer and the one with the new noncontingent buyer?

The one who brought the buyer who was unable to perform until they sold their house may have brought a willing buyer, but they didn't being an able buyer. As you called it a "useless piece of paper," it is useless until they sold their home, unless they opted to buy the house without selling their existing home . . . and that's the option they were still given with the 72 hour right of refusal. If the buyer failed to exercise that option, they remained an unable buyer so the associated Realtor didn't fulfill their obligations and therefore doesn't deserve a commission.

As for the second Realtor, they brought a willing buyer and an able buyer, but everyone went into the offer with the knowledge of the existing right of first refusal. I still don't see the second Realtor deserving any commission should the contingent buyer exercise his right and go forward with the purchase. The condition was known to all.

At least that's how I see it and that's why I don't understand your Board's position. A contract contingent on the sale of a buyer's existing home still gives the seller more of a possibility of a sale than no contract at all, no matter how large or small that possibility may be. To disallow it works against the benefit of all parties.

Let me followup with another question. What happens when someone comes into your area and wants to make a contingent (sale of home) purchase offer? It is a common thing elsewhere in the Nation. Does a Realtor refuse to make the offer?

If the answer is, "yes, they refuse to make the offer," it remains that a contingent offer not an illegal thing to do under the laws of the state . . . or is it? As far as I can tell it's just against the policy of the Realtor's associaiton. They don't make laws. Can the buyer than just fire the Realtor upon their refusal to represent his interests and make the offer directly to the homeowner or the homeowner's agent?

Under that condition, the buyer's ex-Realtor shouldn't be deserving of any commission because they refused to represent the interests of the buyer and failed to act in their benefit. The Seller's Realtor also has the obligation to present all offers to their client, no matter how they may see the offer. That's how I see it, what do you think would happen?
It seems bizarre, but I've seen it happen where two commissions were paid.

First of all, there was no "right of first refusal" to disclose. They are against the rules and regs in this area.

What happened was a builder I worked for about five years ago had an agent who accepted a contract on a condo that was contingent on the sale of the buyer's home. She verbally told them she would let them know if anyone else was looking at it (verbal right of first refusal). A buyer's agent with another buyer came in who was willing to pay full price, close in 30 days, with no contingencies, and they brought in a contract with a deposit check. The agent for the builder said something like 'that's fine, but I have to give the other buyers a chance to "put up or shut up" (which is against GRAR rules and regs, but she didn't realize that). She called them and they said they needed a day to get things in order (keep in mind there is nothing on the contract about a time limit on right of first refusal, because it's not allowed in our area and everyone uses the standard forms).

The new buyer's agent went straight to the builder, told him that she had a ready willing and able buyer who was ready to commit today, but was waiting on the "squatters" to decide, so the builder took the solid deal and accepted it, and told his agent to tell her contingent buyers they were out of luck. However, the first buyer removed their contingency with an addendum and had an executable contract. Two legitimate contracts on the same home. The builder was liable for both commissions, one to the original buyer's agent, and one to the new buyer's agent (of course, he took it out of the hide of his agent). To be honest, I'm not sure which buyer got the condo.

After that, the builder would not even entertain a home sale contingency contract. He would reject them, and I agreed with him. In answer to your question about presenting a contingent offer: Of course, the agent has no choice but to present it to the seller, but it's really just a bookmark. They have to inform the seller of what it really means and that any better offers that come along take precedence.

I'm still of the mindset that NO contract is better than a flimsy home sale contingency contract with no timeline whatsoever of when it will be executed. It takes the seller's and the agent's eyes off the ball and they become complacent waiting for the contingency to be removed (I've seen it happen many times). But if the seller wants to accept it, so be it.

Hope that makes sense. I don't work for the state or the local realty board, so if you want more details you can contact the GRAR.

Sorry for hijacking the thread movingIL.

Last edited by magellan; 08-07-2007 at 11:01 AM..
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