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anyone interested in contingent purchases or bridge loans needs to start with a really good local mortgage lender and a good Realtor.
bridge loans are very rare these days. In essence, you have to be able to afford the payments on both houses, PLUS you still have to have a significant amount of liquidity in place (6 months of all debt payments typically).
"Contingent upon sale" is very different than "contingent upon closing" (which the OP doesn't seem to care about, so we won't cover it here).
If you have a house that is going to be significantly slower to sell than "my" house, then you should consider an offer from me that pays you more during the contract period than you can reasonably expect to get from the next buyer who hassn't even appeared yet.
Heck, properly structured (with the help of your Realtor), you might accept my offer above one that's NOT contingent upon a sale. Would this happen often? No. But if "my" house is going to sell in the next 5 days (because I've gotten my house ready to sell and it's on the MLS at a price that your Realtor tells you Mr Seller is fair), then you're basically no worse off as a Seller, PLUS you probably got an extra couple of thousand dollars off of me.
Because I could just sell my house in 5 days and come back to you with an offer with more than a couple thousand dollars OFF the price, netting you the Seller less.
Now, all that said, it still makes more sense when, as a Buyer, you've identified the house that you want to buy, that will most likely still be for sale once you're under contract and can supply a contingent upon CLOSING offer. There's still risk, but far less to everybody.
At the end of the day, the question any seller should ask is "Will I net an acceptable amount for my home by accepting this offer assuming that it works out?" Because as has been mentioned, ANY contract has enough outs for a Buyer to vanish into thin air.
That's exactly what happened with us. We took the prepping the home seriously. it was a six month project getting the house into sale ready shape and not easy when we lived in the house and we had two small children. but it was so worth it in the end. The realtor priced the house right and voila...our home had an offer in 48 hours. Our sellers had little to lose and much to gain by going with our offer, especially since their home sat for 14 days. 14 days isn't the end of the world, but it was obvious that whatever offers they received weren't what they were hoping for. The longer their home sat on the market, the less actual bargaining power they had. Waiting for that perfect offer could equal more mortgage payments, more having to deal with the ordeals of selling a home, etc. Contingencies backed by contracts are strong offers. It's a gem of a home in a great neighborhood. Truthfully we wanted the house really badly. So, I'm glad things worked out in the end -- we ended up paying $5,000 less, though we got smacked with repairs/replacements a year in so I guess it's even lol.
I am a long-time Realtor and hope to clear up some misconceptions noted in this thread.
It is true that contingent offers have some risks to seller. They also can have great benefits. I would strongly encourage a seller to accept a contingent offer provided:
The contingent agreement to purchase is written with a short bump clause and time frame. I recommend that clause allows only a 24 hour time frame for the contingent offerer to remove their contingency should the sellers give notice of another offer they intend to accept. My research shows that Realtors will be likely to continue to show properties having a short bump clause.
The agreement should be written so that all diligence time frames begin upon contract acceptance versus upon notification that the buyer has received an accepted offer. This serves two purposes: It makes buyers have “some skin in the game” and it eliminates possible reason buyers could back out later in the transaction.
Contingent sales can provide big advantages to sellers and should (only) be considered when they do. Contingent sales can result in higher prices for sellers since buyers have less leverage and need to improve the attractiveness of their offers. Contingent offers can also result in the sale of an otherwise hard-to-sell home.
So when should sellers accept a contingent offer? I believe sellers should consider a well-written contingent offer when the sellers home is more difficult (more expensive etc.) than what the buyers have to sell. If the seller home is $700k and the buyer is selling a fairly priced $400k home in good condition, I would strongly consider such a contingent offer.
Also, if the offer is at a premium compared to the other non-contingent offers, it may very well be worth it.
It should be clearly understood that the seller/listing agent will continue to market the property while the buyers attempt to sell their home. Sellers will frequently find that future offers improve as prospective purchasers need to incent the seller to bump the existing offer.
Contingent offers are complex and need to be well thought out and well written. They aren’t for everyone. But there are situations wherein the acceptance of a good and well-written contingent offer provides great benefits for the sellers that outweigh the risks.
I am not attempting to be adversarial, bless your heart! ( I am not currently on the market, but have been, NUMEROUS times in the past) I genuinely do not see any benefit to a seller. Could you please explain one as I note you are in the business. An offer is an offer, but as a seller, I am after a closing contract.
Ultimately everyone is after a closing contract.
Unless you got people beating down your door you may want to rethink saying no to such contingency offer. Not everyone has the cash to buy another house carry two mortgages while selling another. There are very few buyers who can do this. This contingency was VERY VERY common back years ago before everyone got a stick up their ass and feels so special when they are selling that they only entertain certain offers
I would simply write in a kick out clause where if I get a offer from a buyer without a sell my house first contingency I kick out the first contingency buyer and move on. I’m surprised your agent doesn’t explain that it could be beneficial. For all you know that buyer may be a n a really hot area and could have 5 buyers lined up
I genuinely do not see any benefit to a seller. .. An offer is an offer, but as a seller, I am after a closing contract.
A lot depends on whether you are in a buyer's or seller's market. If you're in a buyer's market you might be thrilled to get any offers at all, and be more willing to cut a contingent buyer some slack.
As a seller I would never entertain any contingency offer that was based upon the sale of a potential buyer's home, even if it contained that 72 hour right of refusal that is being discussed in another thread. I could never see any actual benefit to a seller, no pros, only cons, such as:
1) Home being labeled contingent and impression of off the market to both the brokers and agents as well as the public ( limiting buyer pool, that would not want to waste the time looking at a house under contract)
2) Valuable time being lost while potential buyer tries to sell their home and possibly if ever.
3) Contract price and maybe other details revealed, even IF someone else/another buyer did indeed look and want to buy.
4) Agents/brokers not wanting to tamper with a potential sold when another contract could be made on another house.
5) It appears to only work in favor of a buyer, who I agree will be more motivated to sell his/her own home once they have "found" one; but wouldn't they be EVEN more motivated if they thought that the house they wanted to place under contract was still "actively" on the market? I know technically it is, but it does not appear so, to me.
6) I don't think it locks in any buyer that truly wanted or could purchase the home. If it is there when the buyer can do so without a contingency then it is...if it isn't then the seller sold it.
The clause and that type of contingency offer just doesn't seem to do anything positive for the seller. Possibly beneficial to the buyer and a RE agent/broker, but, why the seller? It actually appears detrimental to a seller in my viewpoint.
Yep, we had one would-be buyer who gamed the system. Said he would put his condo on the market right away (the agents called it a house—they were in cahoots with each other, worked “as a team” for the same brokerage, it turned out). He did, but at a very high price. He kept promising to lower it, but he didn’t—until we said we would not extend the contract. Then he immediately dropped the price and got two or three offers within a week. I had figured out that he intended to delay the closing for a total of four months so that he could leave his kids in school till end of June, so we denied his request for an extension.
If he had been upfront about his plan, we might at least have considered it. The way he gamed it, the only reaction we felt upon realizing what he was doing was to not sell to him.
The whole thing was rigged so that he could tie up our house while shopping around some more and fishing for a better price. And yes, the horrible brokerage—the one where OUR agent was “teamed” with the buyer’s agent—allowed our listing to get slapped with the dooming labels of Pending, Contingent, or Off the Market, depending on which site you went to. We had ONE viewing during that time between going under contract and ending it. Previously, we had averaged two per week, averaged including the dead season of winter.
After that experience, I would be much more reluctant to allow a similar contingency. We had previously sold a house where the buyer did contingent upon sale of his house, but that house was already under contract AND expected to close in four weeks AND the buyer was relocating across states AND had to start a new job in our area. So he had lots of incentive to proceed like a normal buyer and not play games.
We have done many contingent sales that have been beneficial to both seller and buyer.
A home-sale-contingent buyer with a well-marketed and well-priced home can be even more solid than a financed buyer. Not only do they have cash coming from their equity that will likely go from one escrow directly into yours, they will not have anywhere to go if they sell. They need your house! And FWIW, many times, that need, and the contingency has meant seller has quite a bit of leverage on both price negotiations and inspection requests. Fact of life: Home-Sale-Contingent buyers don't plan on getting a bargain price.
Old thread, new comment. We have a closing and sale contingency for when the buyer has a home that hasn't gone under contract yet, and a closing contingency for when the buyers home is under contract but not yet closed.
Sale and closing contingency is fine because it states that the seller can continue to market the home as an active listing. If a non-contingent offer comes in they can accept it and that immediately bumps the contingent to backup status. If contingent buyer chooses to not be a backup offer they can cancel their offer.
As a seller with it structured that way, there is no reason not to take it. Mostly takes that buyer out of the market while allowing you to continue marketing your home.
I am a long-time Realtor and hope to clear up some misconceptions noted in this thread.
It is true that contingent offers have some risks to seller. They also can have great benefits. I would strongly encourage a seller to accept a contingent offer provided:
The contingent agreement to purchase is written with a short bump clause and time frame. I recommend that clause allows only a 24 hour time frame for the contingent offerer to remove their contingency should the sellers give notice of another offer they intend to accept. My research shows that Realtors will be likely to continue to show properties having a short bump clause.
The agreement should be written so that all diligence time frames begin upon contract acceptance versus upon notification that the buyer has received an accepted offer. This serves two purposes: It makes buyers have “some skin in the game” and it eliminates possible reason buyers could back out later in the transaction.
Contingent sales can provide big advantages to sellers and should (only) be considered when they do. Contingent sales can result in higher prices for sellers since buyers have less leverage and need to improve the attractiveness of their offers. Contingent offers can also result in the sale of an otherwise hard-to-sell home.
So when should sellers accept a contingent offer? I believe sellers should consider a well-written contingent offer when the sellers home is more difficult (more expensive etc.) than what the buyers have to sell. If the seller home is $700k and the buyer is selling a fairly priced $400k home in good condition, I would strongly consider such a contingent offer.
Also, if the offer is at a premium compared to the other non-contingent offers, it may very well be worth it.
It should be clearly understood that the seller/listing agent will continue to market the property while the buyers attempt to sell their home. Sellers will frequently find that future offers improve as prospective purchasers need to incent the seller to bump the existing offer.
Contingent offers are complex and need to be well thought out and well written. They aren’t for everyone. But there are situations wherein the acceptance of a good and well-written contingent offer provides great benefits for the sellers that outweigh the risks.
Great information. This will help me when I put our house on the market in a few weeks!
I am a long-time Realtor and hope to clear up some misconceptions noted in this thread.
It is true that contingent offers have some risks to seller. They also can have great benefits. I would strongly encourage a seller to accept a contingent offer provided:
The contingent agreement to purchase is written with a short bump clause and time frame. I recommend that clause allows only a 24 hour time frame for the contingent offerer to remove their contingency should the sellers give notice of another offer they intend to accept. My research shows that Realtors will be likely to continue to show properties having a short bump clause.
The agreement should be written so that all diligence time frames begin upon contract acceptance versus upon notification that the buyer has received an accepted offer. This serves two purposes: It makes buyers have “some skin in the game” and it eliminates possible reason buyers could back out later in the transaction.
Contingent sales can provide big advantages to sellers and should (only) be considered when they do. Contingent sales can result in higher prices for sellers since buyers have less leverage and need to improve the attractiveness of their offers. Contingent offers can also result in the sale of an otherwise hard-to-sell home.
So when should sellers accept a contingent offer? I believe sellers should consider a well-written contingent offer when the sellers home is more difficult (more expensive etc.) than what the buyers have to sell. If the seller home is $700k and the buyer is selling a fairly priced $400k home in good condition, I would strongly consider such a contingent offer.
Also, if the offer is at a premium compared to the other non-contingent offers, it may very well be worth it.
It should be clearly understood that the seller/listing agent will continue to market the property while the buyers attempt to sell their home. Sellers will frequently find that future offers improve as prospective purchasers need to incent the seller to bump the existing offer.
Contingent offers are complex and need to be well thought out and well written. They aren’t for everyone. But there are situations wherein the acceptance of a good and well-written contingent offer provides great benefits for the sellers that outweigh the risks.
This is helpful. I have been on the fence about a contingency planning to submit what may seem like a lowball offer on a house that has sat on the market for almost a year. Thanks.
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