Accepting a contingency offer
Should you accept a contingency offer on your sale? What are the risks and rewards for doing this?
What is a contingent offer?
Contingencies are part of every transaction, and there are several in every offer. In the article, we will focus on the contingency when the buyer of your home has a home they need to sell first. This does NOT include the offers where they have a home in escrow and just waiting for it to close. These deals fall into a different category because we are not waiting for them to get an offer on their home.
If a buyer makes an offer on your home and they need to sell a home to have the funds to close. What should you do? What should you require from them? There safeguards to put in place.
1. Make sure they have their home on the market with a real estate agent. Homes sell faster when on the MLS. It is a fact. Require the buyer of your home to use MLS to speed up the sale, so you can close faster.
2. Is the home priced in an acceptable price range? Have your agent check the home and the comps. You want to make sure they are not priced to high, tying up your home because they cannot sell theirs.
3. Do you have any say in the offer they accept? For example, if they decide to take a contingent offer on their place, the domino stack gets a
little precarious. If any deals prior to yours fall, yours will fall too. 4. When do inspections start? It is acceptable to have inspections start once their home is under contract, but you can ask to have them start earlier.
5. When is the earnest money due? Earnest money should be due upon you and the buyer agreeing to the terms. Earnest Money should not be withheld for extended time frames.
6. What status does the MLS show on your home? Pending? Contingent offer? There are a couple of statuses that can reflect in MLS. “Active with Contingency” is the basic verbiage. It means that someone else can step in and make an offer.
1. They do not sell their house.
Your home is tied up and doesn’t look as appealing as other homes on the market until the contingency is released. See #2 below for more details.
2. Your home is listed as a “active contingent”.
This ties up your house and could have negative effects on your marketing. The negative effect is that the typical agent may not show contingent homes until last resort. They feel like they are not as likely to get a sale completed, so they show every other house first, and only shows the contingent one if the client insists.
When is the right time to accept a contingent offer?
I think I would wait a few days for a contingent offer if it were me. In my opinion, you would want to try to get a cleaner offer first, like one with no contingencies. But if a contingent offer comes in, it is worth checking on the home they are going to sell. The deal may make sense.
After a week or so, you could open up to all offers. At some point the contingent offers are going to be your best option and you may want to lock it in.
Well, you get to sell your home. If all the safeguards are considered, and the home they need to sell sells, you will sell your home too.
The market is swinging at the time of this writing. Its leaning towards a buyers’ market. You will need to make concessions to catch the buyer, or they may buy a different home.