The Home Sale Contingency Catch

If you are selling your home right now, like many other homeowners across the country, you may be tempted to accept a contingent offer. The $64,000 dollar question is, "should you?"

What is a contingent offer?

Consider this. You have had your house on the market for weeks, maybe even months. While not exactly a model house with an address on Wisteria Lane, you are certain it would have sold by now. Yet, you have had very little foot traffic through your home and Sunday open houses held by your agent have produced no results.

Then unexpectedly, a young couple falls in love with your home! At the offer presentation, you discover the bad news. They still have to sell their present home located one town over, and have written the offer "contingent" on them selling their present home. And they haven't even listed the house yet!

Feeling deflated, you turn to your agent to ask for advice.

What are my options? If their property doesn't sell, the buyers aren't obligated to complete the purchase and can walk away from the deal - plain and simple.

In a seller's market where buyers are numerous and demand exceeds inventory, most sellers would not accept such a purchase offer. Doing so leaves you at risk for missed opportunities for offers from qualified buyers who can close quickly, perhaps even for more money.

Without knowing anything about the buyer, or their situation, it's almost impossible to make an informed decision on whether or not to accept the buyer's contingent offer. Even if you like their offering price and the rest of the offer, you can't control what asking price they will place on their own property, thus affecting its potential for a quick sale. However, you can do some research to help you make an informed decision.

Here are five ways to avoid being caught in a bad deal.
  • Drive by the house, if local, and assess for yourself how marketable the property is. Is it located in a "pride of ownership" neighborhood? Does the home appear to be well maintained? How is the landscaping? Does the house have curb appeal? Are there an overabundance of "for sale" signs in the neighborhood or does the neighborhood appear stable. Will the house appeal to today's average buyer in your area?
  • Have your agent do some research on the local market where your buyer's home is located. They can help guide you. Your agent should insist in your contract that the buyers list their home on the Multiple Listing Service with an agent, and give a deadline.
  • Have your agent include in your counteroffer the right to approve the list price. That way if they list for a price that seems unreasonable - which they probably won't since they want to buy your house after all - you'll be able to get out of the contract.
  • Make sure your agent specifies expiration dates for the contingency to be removed. Typically you might allow your potential buyers 30 days to get a sale contract on their existing property, and an end date for closing the sale on your home you can live with.
  • Have your agent continue to offer your home for sale under a "72 hour first right of refusal" clause. Once you receive a second offer, your first buyer has 72 hours to remove their contingency. If they are unable to do so, you are able to go forward with the second buyer.
The catch is, sometimes selling agents can be discouraged from showing homes to buyers that have a contingent contract in place, but in a slow market it may be worth considering. Doing so may just mean a successful sale for you!

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