Whether or Not to Take a Home Sale Contingent Contract When Selling

Real Estate Agent with Long and Foster REALTORS®, Gainesville, VA VA License # 0225089470

Whether or Not to Take a Home Sale Contingent Contract When Selling

Whenever a seller puts their home on the market, the best outcome is to get an offer from a buyer that has as few contingencies as possible.  However, when you have a larger home in an area where buyers may have a home to sell before they can purchase yours, you may have some tough decisions to make.  That move up buyer may present an offer on your home that has a home sale contingency.  What do you do with one of those?

If your agent's advice is, "Under no circumstances should you tie yourself to the sale of someone else's home," well, you may want to consider this story that happened in my own career.

Representing buyers who had a home to sell recently, I was actively listing their townhouse for sale when, during a home tour, they saw a property that they wanted.  We wrote an offer with a home sale contingency since the buyers didn't qualify for their desired financing without selling first.  Simple. Unfortunately, the listing agent advised her sellers not to take a home sale contingent contract.

My buyers' offer had been very strong.  I told them, if they wanted the seller to entertain their home sale contingent contract, they needed to go in at full list price.  They did, but also need some closing help.  They didn't ask for all they could, but $10K.  On a $500K home, that's only 2% of the sales price.  

So when the listing agent came back with an outright rejection and told us to try again without the home sale contingency, I sat down with my buyers.  They qualified with a different loan without selling.  However, they lowered their offer price and increased the closing cost help.  The net loss to the sellers was $5K.  More importantly, they asked for a much longer home inspection contingency (three times longer.)  This is what I call a clue.  The buyers still wanted time to sell their home and have an out.  And since they asked for the home sale contingency outright to begin with, it shouldn't have come as a great shock when the buyers voided their contract a month later after the home inspection.  Their townhouse still had not gone under contract.

Fast forward a few weeks and the buyers' home is under contract and that same home is still available.  They choose to look around and see if there is anything else that has come up in the meantime.  Sure enough, there was.  They ended up buying another home and the original home they were under contract to buy is still sitting on the market and priced below the second offer my buyers made.

Moral of the story is this:  Not all home sale contingent offers are bad.  Your listing agent should evaluate the likelihood of the buyer's property going under contract at the list price, given current market conditions.  In the case above, the net result would have been a successful settlement at a good price.  The property my buyers had to sell was priced right and in a good location.  Instead, the sellers' unwillingness, at the listing agent's advice, to consider a home sale contingent offer landed them in a very unfavorable situation.  They are holding onto a property much longer than they wanted to and listed now for far less than they actually had staring them in the face in a home sale contingent contract.

Not all home sale contingencies are going to be winners, but it isn't rocket science to figure out which ones are less risky than others.  



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Beth Atalay
Cam Realty and Property Management - Clermont, FL
Cam Realty of Clermont FL

Chris Ann, the key is working with a Realtor who knows and understands the local real estate market and advises his/her clients accordingly. You're right not all contingencies on the sale of a house are bad and should be rejected but it happens. I'm happy for you and your seller/buyer clients.

Aug 08, 2016 10:33 AM #1
Ed Silva
RE/MAX Professionals, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

In our state, we call that type of contingency a Hubbard clause, which gives the potential buyer right of first refusal and doesn't completely take the house off the market.  The issue wold be the agent not truly understanding how to make it work for their seller

Aug 08, 2016 10:53 AM #2
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

There are all kinds of ways to make a sale contingency work. I've pushed listing agents to take offers when my seller's home wasn't even on the market, LOL, but I perusaded them to take it because they knew I would sell their home and I did. I will almost always advise my sellers to take a contingent offer, primarily because I know with low inventory the contingent home will sell and the sellers might not get a better offer. Like you pointed out, Chris Ann, contingent buyers are very generous.

Aug 08, 2016 11:05 AM #3
Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Though I am not a fan of contingencies, with the right terms and a bump clause they can sometimes add up to the best deal.

Aug 08, 2016 12:47 PM #4
Alan Gross
PrimeLending, A PlainsCapital Company, Equal Housing Lender - Bethesda, MD
Loan Consultant

Chris Ann Cleland  You never know what's going to happen when buying and selling real estate. I wonder what the sellers would think if they knew the story you just told and realized they could have had their home sold.

Aug 08, 2016 10:28 PM #5
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

There is a time and a place for a contingent offer Chris Ann Cleland . It depends on the market, the seller and if there are any buyers without contingencies.

Aug 09, 2016 12:03 AM #6
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

What was wrong with the home during the inspection?  That would have happened either way, no?  Good moral of the story. 

Aug 09, 2016 03:22 AM #7
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Chris Ann - I've seen that same scenario play out like that as well. Our market is weird for contingencies right now - higher end sellers are more likely to take them, but it's the lower-priced listings that offer the safest contingencies, since they're flying off the shelves.

Aug 09, 2016 05:55 AM #8
William Feela
Realtor, Whispering Pines Realty 651-674-5999 No.

I have sold many home with that contingency.  Some have been sold within days with new offers and others have been sold when the buyers sold their homes

Aug 11, 2016 12:28 PM #9
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Chris Ann Cleland

Associate Broker, Bristow, VA
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