In Cedar Rapids, the average home price is about $175,000 so in most cases, homes that are above the price will have their fair amount of buyers that must sell, and receive the proceeds from that sale, in order to purchase another home.
What is a subject to sale contingency? This is when the buyer currently owns a home that they must receive the proceeds from in order to purchase your home.
First, there are two types of subject to sale contingencies.
1. The buyer's current home is on the market and has received an offer from a qualified buyer. In the purchase contract on your home, the buyers' agent will give us the information about when the inspections and other contingencies are expected to be released as well as the expected closing date and proceeds of that home.
In situations where the buyer's purchase is only subject to receiving the proceeds from their current home with a set closing date, all that is needed is a copy of the offer on their home for verification. I will request this documentation from buyer's agent prior to acceptance of their offer. If I need clarification, I can also call the buyer's lender to find out more information. You see, we are going to essentially take your home "off the market" as a sale pending, so if something is shaky with this buyer or the buyer for THEIR home, we need to know about it!
2. The buyer's current home is currently on the market, but does not yet have a buyer contract. This is essentially an offer that is not viable at the current time. We can accept the terms of their offer and negotiate the price, but in doing so, we are going to give them pressure to get their home sold. We are going to give them a specific time frame to obtain a buyer for their home, typically 45 days. We are also NOT going to remove your home from the market. We will continue to show and market your home to other buyers. We will require an hour clause to be signed by the buyers that specifies if we receive another acceptable offer, they will have ___ (number) of hours, typically 24 hours, to release their subject to sale contingency by either selling their home or obtaining financing WITHOUT selling their home. If they cannot release their contingency in that timeframe, the second buyer is accepted and the first buyer is out and their earnest money is returned to them.
Receiving a contingent offer can be a good thing. We can negotiate a favorable contract, set limits on their time to produce a sale on their home, and we can continue to market your home to other potential buyers in the meantime. We will need to disclose to other potential buyers that there is an hour clause on your home, but buyers that do NOT have this type of financing contingency, or no home to sell, will still view and offer on your home if it is the right home for them.
In today's current mortgage market, most homeowners do not have the ability to have more than one mortgage. If the buyer has a home that is out of our area or out of state, I usually do not recommend accepting such an offer without knowing more about the marketing of their current home and the estimated days on the market. It is just a huge disappointment to all involved when things do not work out.
So where does accepting this type of offer leave us? If it is the first situation, we better start looking for another home! Chances are good that the buyer will be able to perform and we do not want to be homeless. With option 2 where there is no buyer yet for the buyer's home and we are in a hour clause, we will look more aggressively, but we will NOT be making an offer on another home until the subject to sale is released by the buyers. We do not have the best negotiating position when we are offering on a home with that type of contingency.
I know that all of this sounds complicated, but this is where you need an experienced professional to represent your best interests and give you their advice based on all of the information.
Call me today for your free listing consultation and let's see if we can get you on your way to a new adventure!
Keep smiling!
Karen
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