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With the market the way it is, I'm just looking for opinions on whether it is a good idea to accept an offer that is contingent on a prospective buyer selling his/her home. In Georgia, that essentially means that the seller takes his/her house off the market while the buyer is trying to sell theirs. If they can't sell, then the deal's off. There is a provision where the seller can continue to market the home during the contingency period but we've been advised by our agent that many agents don't bother showing homes with that provision.
I'm looking for second opinions on this because aside from the issue of buyers having difficulty selling their own homes, why would agents not show homes where there is a buyer home sale contingency but the seller is still actively trying to sell their home?
The simplest answer is that right now with an excess of inventory in most markets you are pretty much forced to accept contingent offers.
The inevitable side effect is that agents will NOT be eager to show your house to other buyers, because the result would likely be that any buyer that sees your place but "decides to see if the deal on it goes through" is dealing the agent from showing other homes. Agents like to sell FAST, and if buyers sees a home, that may be sold when the contigent sale closes, or may still be available if the contigent sale never happens, will add A LOT of time to the process...
It depends on your market; in my markets (I am based in/have homes in Northeast, SoCal, Florida) I as a seller would not accept any offer with contingencies.
I am a seller. I won't take an offer contingent on selling their home. If my house is still available when they sell theirs, then fine. In my mind, there is no real advantage to making my house unavailable until they sell theirs.
Contingency offers are pretty common in some areas and some price ranges. We accepted a contingency offer on our last home and the home continued to be marketed fairly aggressively. We received a second non-contingent offer and ended up selling the home to those buyers.
In this market, a contingency could be a little comforting unless you really feel your home won't be shown anymore after accepting the offer.
That could take months or years in this market. JMO. Every market is different. It would also depend on what they plan on selling their house for, how competitive it is, etc.
That could take a LONG while for their house to sell. And here's the thing, you have nothing to lose. Obviously you have a nice home because someone wants to buy it. If someone buys in the meantime, before the other person's house sells- FANTASTIC! If someone else doesn't make an offer, than those original people can make the offer at the time their house sells and the transaction is all the same as it would have had you accepted their contingent offer in the first place.
You have nothing to lose. They can make the offer when their house sells, IF yours is still available. Besides, I do not see what you have to GAIN. Yes, they're in a contract with you, but say they find a house they like better in the months waiting for their home to sell. All they have to do is have an inspection of your home turn up any little thing wrong, blow it out of proportion and cancel the deal. Then you are left with NOTHING and may have passed up a buyer in the mean time.
I say NO WAY. Besides, there are nice incentives for First Time Homebuyers right now (myself being one) and as such, there should be a small group of people coming out of the woodworks with no contingent strings attached.
Let us know what you decide to do!
Thanks! Jenn :O)
Generally speaking, I am not a fan of home sale contingencies, especially in depreciating markets.
Most buyers, especially in this market, do not want to waste time looking at homes that are under home sale contingencies because they do not want to get into a potential multiple bid situation and there are so many other homes for sale.
In my area, buyers usually pay more under a home sale contingency, because the buyer imposes increased risk on the seller and potential lost opportunity time. This is one of the reasons, such offers might be considered by a seller. If my client was seriously considering an offer with a contingency, I would do my homework and my own analysis and CMA of the buyer's home, including, if practical, an onsite inspection. ( I would not assume all listing agents are willing to do this kind of legwork ) If the buyer's existing home is not adequately marketed to sell, it's a waste of valuable market time.
I am aware of some home sale contingencies that are 5 dependent deep and when one contract fails, the whole chain falls apart.
Lastly, there is a difference between a home sale and a home close contingency. The buyer might be under contract and want to make the purchase of this home contingent upon the close of his existing home. This too requires investigation to determine the likelihood of his buyer closing. Bridge financing is also another alternative to explore to hold the deal together.
A seller that accepts a contingent offer can, and should, make provisions that they are comfortable with. If the buyer clearly is going to market their home at a fair price and in a manner such that a sale is LIKELY then the seller would be foolish to reject the contingent offer. If the buyer is unlikely to sell their home then the seller really needs to judge how likely it is that they will receive offers w/o contingency.
In some markets / price points I suspect there will be more buyers, as the tide is shifting a bit as the "sky is falling" types have been proven to be overreacting, but in much of the country there are still FAR TOO BUYERS and far too much inventory. A contingent offer is much better than no offer at all.
Accepting a contingent offer really carries little more than a hypothetical "lost opportunity" type risk. In this market this is FAR better than the risk of CONTINUED market weakness leading to FURTHER price erosion.
In the current market conditions there is little appetite for bridge loans. Lenders are aware that market conditions are such that bridge loans are likely to over-extend even good risks, and if the home of the 'buyer' never gets any offers, or offers so far below expectation that the viability of the sale of the 'new' property is in jeopardy this can create a domino of failed transactions that quickly spreads. Contingent offers avoid this actual financial exposure. They are VERY appropriate in these times.
Real estate agents (myself included) know that when a contingency falls apart WE DON'T get paid, and as such it is NO SURPRISE that this is NOT the preferred situation, but to move toward SOME sales there are some things that must be accepted. In a rapidly appreciating market it is much harder to advise a seller to accept a contingent offer, although a right-of-refusal type structure might be OK; of course the assumptions change.
Buyers in this market are painfully aware that their own home is NOT worth what it was at "peak" and rightly expect sellers to weigh this in when evaluation offers. If the market was moving upward a contingent buyer may be hoping to merely get the maximum for their existing home, but in this market, with prices moving downward, the buyer almost certainly has a target price that MUST be met if they are to afford the new property.
Last edited by chet everett; 04-22-2009 at 12:16 PM..
Generally speaking, I am not a fan of home sale contingencies, especially in depreciating markets.
Most buyers, especially in this market, do not want to waste time looking at homes that are under home sale contingencies because they do not want to get into a potential multiple bid situation and there are so many other homes for sale.
In my area, buyers usually pay more under a home sale contingency, because the buyer imposes increased risk on the seller and potential lost opportunity time. This is one of the reasons, such offers might be considered by a seller. If my client was seriously considering an offer with a contingency, I would do my homework and my own analysis and CMA of the buyer's home, including, if practical, an onsite inspection. ( I would not assume all listing agents are willing to do this kind of legwork ) If the buyer's existing home is not adequately marketed to sell, it's a waste of valuable market time.
I am aware of some home sale contingencies that are 5 dependent deep and when one contract fails, the whole chain falls apart.
Lastly, there is a difference between a home sale and a home close contingency. The buyer might be under contract and want to make the purchase of this home contingent upon the close of his existing home. This too requires investigation to determine the likelihood of his buyer closing. Bridge financing is also another alternative to explore to hold the deal together.
She shoots and SCORES!
Off the market and back on is a poison pill for a Seller.
And "contingent" is interpreted as OFF the market by most agents.
Seller would do well to get some one-way cash and perform the due diligence that Mom mentions. IMO.
Complete agreement on the difference between Sale and Closing Contingencies.
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