Should Sellers Accept Offers with Home Sale Contingencies ?

By
Real Estate Agent with EXP Realty 414-525-0563 57026-90 Broker

. In a fast moving Sellers market one of the concerns that people have is...they could put their house on the market...upsizing or downsizing...or just moving for another reason...BUT....where will they go ? OR if they find the purrrrrfect house and have not closed on their house..Sellers Market.but they have an offer...how does that all work when they write an offer ?

     From a Sellers perspective ....what will they miss in terms of other offers IF they accept one with a home sale contingency ?

     It is more important than ever in markets like this to be working with an experienced real estate agent AND a qualified lender to craft offers and arrange financing that is best suited to each unique situation. 

   Sooo...you have sold your house...but not closed and find the house that is your next happily ever after. You need the proceeds of your present home to purchase the new home....what is a Buyer to do ?  As with any net sheethome search....go get a pre approval and explain and bring the offer to your lender. The agent who listed your home should have given you a "net" sheet...showing you what the proceeds would be from your home sale....inclusive of taxes, commissions, etc.  You know the profit...you know what other funds you may be using from savings or investments if you choose, and can use as a down payment on the new house. The lender will calculate the amount for which you are pre approved and estimate your new mortgage payment given that interest rates are not likely to stay the same. 

    Now...you have your pre-qualification...which will read "contingent upon the successful closing of the present residence at ...your address."

     You need to make the Sellers of your next "happily ever after" comfortable with your financial arrangement. At what stage are you with the sale ? Has your home passed inspection ? Has the  appraisal been done ? How close are the Buyers for your home to receiving their "final financing approval" (In Wisconsin we call it Loan Commitment).  Have  the agent writing the offer furnish as many progressive details as possible and offer to share more as your sale progresses. their house to bfamily picturee your 

 Include a letter if you wish telling the Sellers how very much you want their house to be your next "happily ever after."  We have gotten pictures of the family...including pets smiling back at Sellers, pulling ththe heart strings and adding a note of emotion...making the Sellers feel that the house  they have called home will be well taken care of appreciated byy the Buyers.  As a Buyer you have done all you can...with as much earnest money as you can deposit...to show the Sellers you are very serious about this purchase.

      Sellers...What IF someone other buyer comes along while you are waiting for the first buyer to get an offer or have a successful closing on their home and you have accepted the "home sale contingent offer ?

     Not a problem...in that offer..it likely had...or your Agent, Mr. /Mrs./Ms Seller has added what we call a "bump clause."  This says if the Sellers DO receive an offer that does NOT have a home sale...they will give you X hours (typically 48) to remove that home sale contingency from your offer.  There are a number of ways this can be done...but that is another post !  

  for sale While the Sellers home is on the market with a contingent offer..it is still active in MLS and the listing agent makes any other agent interested in writing an offer, that there is a contingent offer in place. This requires them to write an offer in "Secondary Position" which will be elevated to a primary position if the contingent buyers cannot remove their home sale contingency in that limited time period.

    'Sound complicated ?  A little...but not for an experienced agent !  If you are in southeastern Wisconsin...Call Sally K. & David L. Hanson, 414 525 0563,,Broker Associates with EXP Realty  and we will be honored to be of assistance for all things real estate.

Posted by

Sally K. & David L. Hanson, ABR, CDPE, CSS, e-Pro,ILHM, REDS


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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Gabe Sanders 09/01/2018 11:00 PM
Topic:
Real Estate Best Practices
Tags:
home sale contingencies

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Rainmaker
162,775
Rhonda Burgess
Southern Living Realty Partners - Smyrna, TN
Moving to Nashville TN Real Estate Specialist

I just completed the longest sale contingency/purchase I've ever done.  4 contingencies back to back and we were the first of the dominos to fall.  The sellers of the house my sellers were buying were willing to wait for her house to sell because they were both in law enforcement and they wanted to help a fellow officer out.  That wasn't nothing but the Lord at work right there in this crazy hot market. 

Aug 27, 2018 08:41 PM #27
Ambassador
891,409
Lynn B. Friedman
Atlanta Homes ODAT Realty Call/Text 404-939-2727 Buckhead - Midtown - Westside -- and more ... - Atlanta, GA
Concierge Service for Our Atlanta Sellers & Buyers

Sally K. & David L. Hanson   Tammy Lankford, comment #26, explained out "kickout" which is your "bump" option. On to your other point:
What you call "secondary Position" is called a "Back-Up Offer" here in GA. IMHO, that is the smart way to proceed when my Client wants a home already under Agreement. So many things can make a Contract fail - not just the sale of a home as you mention. Twice this year, in this CRAZY market, we have succeeded with "Back-Up Offers".

The benefit is that our Clients were already finished negotiating with the Seller - had a firm contract in hand with everything lined up and ready to go when the first offer disappeared. On one sale, the person who dropped out came back only two days later and wanted back in again! Too late! Our FIRM Back-Up Offer was in place! Lots of work but worth it when our Client got the home wanted.
" ... write an offer in "Secondary Position" which will be elevated to a primary position if the contingent buyers cannot [perform]"

Aug 27, 2018 09:15 PM #28
Rainer
233,369
Randy Elliott
RE/MAX Gold - Lodi, CA
REALTOR : Lodi / Stockton, CA

With these situations, everyone involved needs to have patience, and learn to all get along and play nice in the sandbox.  If that's the case, then let the experienced agents do what they've been hired to do and all should end well for everyone.  

Aug 27, 2018 11:02 PM #29
Rainmaker
52,092
Cathy Starkweather
La Rosa Realty, LLC. - Celebration, FL

I typically suggest to sellers with a contract in place... before writing an offer on another home to at LEAST be beyond the inspection contingency of their current home sale. When negotiating the current home sale, we ask for no more than 7-10 day inspection period so we can move to the next phase of the sale and remove this contingency quickly.  Terrific post! 

Aug 28, 2018 06:12 AM #30
Rainer
5,732
Paula Zaluski
Action Realty - Sebastian, FL
20 years of Real Estate Experience.

I believe we've all sold a home in this manner. All depends on the situation and the knowledge of the agents involved. Our market is changing here, not really a sellers market. However, it's almost snow bird time. Thanks for the post. 

Aug 28, 2018 06:55 AM #31
Rainer
130,584
Anne Corbin
Long and Foster - Lake Anna - Spotsylvania, VA
Serving Lake Anna & Central Virginia

I currently have a contingent purchase while I try to get the residence sold. It is challenging, especially when your seller is set on a selling price. As a realtor, I'm trying to make them understand that they purchased the home at the height of the market and they may not get that back just yet. Time will tell.

Aug 28, 2018 07:04 AM #32
Rainmaker
133,156
Greg Kilroy
Keller Williams Sonoran Living - The Velocity Group - Paradise Valley, AZ
the Velocity Group

An especially important time to research the experience of the agent bringing that contingent offer, since your success in closing will be tied to their success in closing!

Aug 28, 2018 08:08 AM #33
Anonymous
Angela Brady, Equitas Realty

Great article-- but isn't the suggestion below a potential violation of Fair Housing? It would be considered as such in my market...


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Aug 28, 2018 11:16 AM #34
Rainmaker
442,746
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

Our market is so HOT right now ... with homes selling on Day 1 on the market ... that Home Sale contingencies are not being considered in anything but backup positions.

Aug 28, 2018 11:22 AM #35
Rainmaker
3,187,436
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

No @Angela Brady I think what @Diana Dahlberg is saying is what every agent would say...the Buyers without a home sale are first in line...and backup is what happens when a home sale is involved with the property...No violation at all.

Aug 28, 2018 11:25 AM #36
Anonymous
Angela Brady

@Sally Hanson, I'm sorry, I was referring to the original article and somehow the section I was referencing was omitted. It was the part about....
Include a letter if you wish telling the Sellers how very much you want their house to be your next "happily ever after." We have gotten pictures of the family...including pets smiling back at Sellers, pulling ththe heart strings and adding a note of emotion...making the Sellers feel that the house they have called home will be well taken care of appreciated byy the Buyers. As a Buyer you have done all you can...with as much earnest money as you can deposit...to show the Sellers you are very serious about this purchase...
In my market, this correspondence/communication can be construed as a potential violation and attorneys are advising that their seller clients refrain from accepting such letters/photos, etc.

Aug 28, 2018 12:17 PM #37
Rainmaker
3,187,436
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

We have not ever heard that...and that in our very non legal opinion is legal nonsense...

Aug 28, 2018 12:33 PM #38
Rainer
4,400
Don Wede
Heartland Funding Inc. - Spring Valley, IL
A company that buys houses in Illinois

As a seller I do not like the idea at all.  On the other hand if I am buying a property I like the idea.

Heartland Funding Inc.

www.HeartlandBuysHouses.com

Aug 28, 2018 12:41 PM #39
Rainmaker
1,093,716
Barbara Michaluk
Weichert Realtors | Silver Spring, MD Phone Direct 240-506-2434 - Silver Spring, MD
Top Producing / Full Service REALTOR in Marylan

This is good info for sellers to be aware of the various options and contingencies that are presented in contract offers.  It is in their best interest to work with an knowledgeable listing agent who can advise them on how to handle all the terms included in contract offers.

Aug 28, 2018 01:36 PM #40
Anonymous
Angela Brady Equitas Realty



Not sure if I can share, but here's the link to a recent article in our New York State Association of Realtors publication :

http://pubs.royle.com/display_article.php?id=3030019&view=480520

It's a quick, interesting read which explains why sellers (and sellers' agents) should refrain from accepting any correspondence from buyers and/or their agents.

Bottom line, it's a tough market in which to be a buyer and it's understandable that buyers want to do everything possible to improve their position-- but sellers must set their emotions and heartstrings aside and use caution. @Sally H, thank you for writing about this very pertinent topic.

Aug 28, 2018 02:11 PM #41
Rainmaker
3,187,436
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

My Mac is not letting me read the link @Angela Brady....one of the things we always say is that if there was only legal opinion, there would be one lawyer. Many people would view that as a "very good thing" ...however not the case in the real world .  Thank you for your comments.

Aug 28, 2018 02:19 PM #42
Rainer
7,256
Frank Spencer
Coldwell Banker Dynasty - Arcadia, CA
Residential Sales, Commercial/Res Property Mngmt

My last three sales were all subject to the buyers home selling. Each closed without a hitch. My fourth will close on the 12th of September. My advice is simply this, make sure that you know all that you can about the buyer's sale. Properly qualified, these transactions seem to avoid some of the drama in more traditional transactions, the buyers have to move. They write clean offers. And, they don't ask for much in return. 

Aug 28, 2018 04:27 PM #43
Anonymous
Terry Hunter

In an abundance of (legal) caution our MLS has made contingent offers difficult. In the past, there was a "1st Right Of Refusal" status. A listing agent could accept a contingent sale (with a time period for the contingent buyer to perform), knowing that s/he was not taking the fiduciary's home off the market... it could still attract offers (maybe even more offers, LOL). Now, however, along the lines of "at night all crows are black" EVERY in escrow property is coded "U" (nonsensically, "Active but Under Contract"). And this "in escrow" status has to be reported within 48 hours. Our (SoCal) market is cooling off, and being able to do contingent sales without totally disadvantaging one's seller would be useful. However, the MLS has just about eliminated the possibility unless the contingent home is well along with completed inspections, etc.

Aug 28, 2018 06:50 PM #44
Rainmaker
3,187,436
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

WOW @Terry Hunter....MLS  in many markets seems to have taken on the role of running the industry not helping it...this would be a good example !

Aug 29, 2018 01:20 AM #45
Rainmaker
1,217,687
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Answer:  Maybe??  But as you so beautifully point out, certainly not until you have had a thorough conversation with your agent (and LO) ... and weigh all your options.

This is a conversation/topic I have with many of my clients, Sally K. & David L. Hanson ... and caution them about, should they have to sell a home in order to buy again.  My advice is always to have that conversation with their agent before moving forward ...  

Gene

Aug 29, 2018 09:26 AM #46
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Rainmaker
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Sally K. & David L. Hanson

WI Realtors - Luxury - Divorce
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