Real Estate Advice
Contingency School
Dear Pat,
Our friends sold their house earlier this year to buyers who made a
"contingent" offer. Now, two months later, the buyers' house still
hasn't sold and our friends are stuck. Since we plan to sell this
summer, how do we avoid such a pitfall? From what we've seen the
negotiations can get pretty complicated, and we're…
---Still Learning
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Dear Learning,
I salute your "diligent student" attitude, and I intend to reward it
with a simple answer to your question by the end of class. But before
you nod off, let's begin a short course in contingencies, both stated
and implied, as they occur in a transaction.
Think of a contingency as an "if"--if A happens, B is decreed. For
example, most purchase agreements these days are contingent upon buyer
acceptance of the results of a private home inspection. When the
buyer's inspection reveals problems, the buyer may offer to remove the
written contingency if the seller agrees to make specified repairs.
However, the implied contingency remains until the repairs are
actually made, and the buyer could refuse to close unless the seller
performs.
More examples: all offers other than cash are contingent upon the
buyer being able to obtain financing; the house must appraise at or
above the purchase price; the seller must provide marketable title.
Although adequate preparation normally avoids problems in these areas,
they are big Ifs that officially remain for many weeks after the
purchase agreement is signed.
I've outlined just a few of the more obvious contingencies within the
big bundle of promises between the buyer and seller that comprise the
purchase agreement. Failure to honor ("perform") any of these promises
can break the contract and sink the transaction. Thus, in the broadest
sense, all offers are "contingent."Thanks for
staying awake in class so far, Still Learning. Now, to your question:
the "contingent offer" you mentioned occurs when the seller agrees to
price and terms offered by the buyer, but contingent upon the buyer
actually selling his/her own home first. ("If I sell my home, I will
complete the purchase of your home.") |
The seller can continue to
show his/her home, and may entertain other offers,
but cannot accept any other offer until the
original buyer has been given 48 hours (typically)
to remove the contingency and proceed with the
purchase, house sold or not. The obvious advantage
to buyers is that it gives them more time to sell,
and they can often remove the contingency if
pushed by a competing offer. Sellers are not
advantaged by the deal, however, since the task of
continuing to show the home becomes much harder
when other agents are informed that the home is
already sold "contingent." I'd guess that it
reduces showings by 80%. As a listing agent I've
never advised a seller to accept this kind of
contingent offer.
Still with me, Still Learning? Your friends have
spent a long time on the market trying to overcome
their "sold contingent" status. Here's how to
avoid that pitfall: if you see a strong offer
contingent upon inspection, that's great. But if
it's contingent upon the buyer's house selling
first, just say no.
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Pat
Rosaves is a full-time real estate
professional living in the Seward -
Longfellow area. She has more than 28
years experience in helping people with
their real estate needs. Questions may be
sent to her at River Realty, 2543 38th
Avenue South, Mpls, MN 55406. Or call her
at 612-724-1314 or email her at Pat@RiverRealty.net |
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