Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
So, I am curious about an offer that is contingent upon the sale of the buyers home. How does that work? Can we still accept offers from other people while waiting on them to sell their home?
We had a showing today and the realtor mentioned the people who looked were just putting their home up for sale. This topic came up, and I said for them to talk to my realtor, but we would be happy to look at any offer that was presented. I just would like some knowledge.
For background information, we are planning to build another home. We have land to build that home on, so I know where, when is up in the air. I do not plan to break ground on a new home until the one I am currently in is sold. I plan on renting until the new house is done. (No real desire to try and hold 2 mortgages) So, while I wish to sell, I am not rushing to get out. So, having a deal in the works is fine, but I need to know what all that would entail. There is no offer yet, but I would rather think about it without someone waiting for a reply.
Your listing broker will be able to answer your specific questions but here's a thumbnail sketch.
Accepting an offer based on a contingency is very common. Often there is a kick out clause wherein if you receive another offer that you like better, such as a cash offer, or an offer with no major contingencies other than the usual inspections, you give the first buyer so many days to either buy it without the sale of their home contingency, or cancel the transaction. I have bought several houses while selling the other one; timing of everything is important but it's not that big a deal. In a good market where most properties are selling within a couple of months, this is common.
It's not very common for a seller to accept a contingency without the buyer's house at least being under contract itself. When it's just on the market, you never know when they'll receive an offer and you might be taking your house off the market prematurely. Yes, you can receive other offers and yes you can utilize the kick-out clause, but the status would not be "active". The status would be whatever your market uses to show there is a contract but accepting other offers, and many times those properties are completely scratched off a buyer's list to look at because who wants to fall in love with a house that has a less likely chance of being able to be bought than a property that doesn't already have a contract?
Basically, you would be narrowing your buyer pool considerably. If the buyer has a contract on his house, that's a slightly different situation, but you better have your agent speak with the agent on the other side to see about that buyer's financing on your buyer's house to ensure it's actually going to close.
You want to see what sort of a sales contract your potential buyers have. If their house is not yet sold, they might accept a contingency offer themselves.
Your house can't sell until their house sells and their house can't sell until another house sells.
Heck, that third house in the chain might have a contingency offer. There could be 6 houses that can't sell until the very first house in the chain closes escrow.
As pointed out, it is a slippery slope which MIGHT make you (the seller) feel a little better, but after you start to think about it the 'good' part starts to fade, and the 'bad' stuff bubbles to the surface. You now have a diminished buyer pool--some folks won't even look at a contingency situation; the contingency situation is unlikely to be met in a timely manner --your buyer is just listing their house-; and you don't control the feedback--how are you going to get info on how your BUYER's sale is going, which means you don't really know how YOUR sale is going? That is VERY Frustrating.
I always wondered if it doesn't put more pressure on the potential buyer if you refuse to do a contigency--do they feel a sense of urgency if they really want your house? Your buyer has nothing to loose with a contingency, but your hands are somewhat tied. Maybe you adjust for this in price.....like agreeing to a contingent sale at full price.
The door swings both ways. Look before you leap. It is not as good a deal as it might seem on the surface.
For some reason in our market the houses remain active if there's a contingency clause requiring the sale of a home. I found that a bit misleading.
I bet if you called the board of realtors or association of realtors for your market, you'll find that the listing agent/brokerage is breaking one of their rules. It's usually an MLS rule that all statuses and changes must be updated within X number of days. If there is a contract on the house, it's NOT "Active". Many markets charge fines for misleading and incorrect information. Call them!!
Everything is negotiable.
There are various ways to address a contingency offer; the most common are already mentioned. It is typical for a seller to counter with a First Right of Refusal, or another satisfactory form of a kick out clause and one can limit time periods too of contingencies or FRoR's. Have a discussion too with your agent about whether or not to stipulate to a buyer for them not to accept sales contingent offer on their property in order to avoid a chain of properties needing to sell and close, afterall it shouldn't be your burden and worry too per se.
I don't ever like to recommend accepting a plain contingency without making Earnest Money hard after a time period afterall, it is a discretionary outage too for a buyer, and they can potentially use it as an excuse if they have cold feet later on etc; meanwhile the seller potentially lost valuable market time etc and all a buyer has said is "whoops, sorry but thank you or your time". To avoid having to mess with all that, I will construct an appropriate FRoR so that it is the seller who has better control of potentially kicking a buyer off to the side should a better and/or easier offer comes along. So, a buyer should only then have 2 options: remove the contingency and move forward or terminate so that the seller can close with the other/better offer. At the end of the day, you as seller should be the driving force and call the shots about a contingency regarding their sale and closing of their property - not the buyer.
Hopefully all these posts give you enough info to have a discussion with your agent!
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
