Profile picture for rmcdonal

How to respond to a strong, but contingent offer

Our house in Dallas went on the market Friday. We had 3 showings over the weekend, and we have received an offer. The terms are very good: 98% of asking price, greater than expected earnest money, reasonable expectations for financing, usual 10-day option period). They set a closing date for six weeks out, with a contingency upon the sale of their house (beautiful home in prestigious area, new on market, etc.).

We take the fact that we got an offer so quickly as promising, and an indication that we are fairly priced. Our realtor has indicated that although she sees clear downsides to contingencies, this appears to be a solid offer and worth considering. Two other properties sold very quickly in our neighborhood recently, but the asking (and selling) price per square foot for both was a bit below ours. Several others have languished.

Because we got an offer, and a good one, so promptly, it is tempting to assume that we'll get another, and without a contingency. However, our realtor has indicated that offers have recently been very slow in coming in our market (6-9 month market), with lots of concessions by sellers. So, our question is whether to take a very good offer with a contingency, or take a pass and wait, with all the uncertainty that waiting entails.

We're also not sure about how to respond to the offer -- what will be fair to both parties, without risking too much on either side. Any suggestions or words of wisdom would be greatly appreciated.
  • September 01 2008 - US
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

Answers (29)

Profile picture for bethrahrig

I'd take it, and add a kickout clause.  That way, if a better offer does come along, the first people have 24-48 hours to either drop the contingency or improve their offer.

  • September 02 2008
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

i agree with bethrahrig. that's how i got my house. the house had a contingency offer on it, at full asking, for 7 months. we came along, offered much less than asking (which was ridicuhigh). the sellers gave the contingent buyer 48 hours to come up with the money, they didn't, we got the house.

  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for writeagain

Take it, take it, take it.  You can't be so sure you'll get another offer this strong any time soon.  Just add a kick-out clause and make sure you continue to show it.  You may get a back up offer.

  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for mpal.

yep, what they said :)

  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

some people on this board have said that agents dislike showing homes with contingent offers (not sure why) so make sure you tell your agent that you still want it aggressively marketed.

  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for Judy West

I would also recommend that your realtor do a little research on the buyer's home, asking price, comps, DOM for like homes etc to give you an idea if they're priced right and in an area that is fairly active.  Just to give you some kind of frame of reference on the contingent sale.

  • September 02 2008
  • 2Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

props to judy for that one!

  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Agreeing with most of what is said here I'll just add a couple things.

There is a big difference in a contingency offer when the buyers already have the house they need to sell under contract just not closed. If that is the case then you are in a great situation.

If not then you run the risk of not being able to sell to them and having your property listed as under contract. 6 weeks is a very short time, so my thinking is that they already have their house under contract.

Definitely do the 24 hour first right. Make sure your broker lists your property as active and not as under contract because this makes a huge difference in the amount of activity you will get. If its listed as under contract people won't waste their time seeing the house. List it as active and just disclose the 24 hour first right when people want to show it.

Last thing, what is the 10 day option period?
  • September 02 2008
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for Mark75NYC

I guess some people consider "kick-out" clauses fairly standard, but as a buyer, if I needed a contingency clause I would not go along with adding a kick-out clause.

 

From the buyer's perspective, it essentially makes your "agreement" worthless.  If a higher (or equal, without contingency) offer comes along, the seller can drop you.  But if the housing market continues to tank and the value of the house sinks, the buyer is still stuck with the commitment to buy the house.

 

What does the buyer really get by commiting himself to such a deal?  IMO, rather than accept a contract with a "kick-out" clause, it's much better for the buyer to simply put his house on the market and wait until he is confident that he'll close on his sale, and then make a non-contingent offer on something he wants to buy.  But if, as a buyer, I needed to make a contingent offer, I would never accept the added kick-out clause in the case of a "better" offer.  (But I would accept a time-limit on how long the contingency would last, after which time BOTH parties would be freed of their obligations.)

 

Just my 2-cents, in case you're concerned about how the buyers will respond.

  • September 02 2008
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

i think the kickout clause is fairly standard, but i can see your reasoning, mark. but, look at it from the seller's pov. if she (?) does take her house off the market for even 30 days, she may miss the buyer who actually has the money right now. what you recommend is best for the buyer, but not best for the poster.

  • September 02 2008
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for GetSusan2Florida

What is a "kick-out" clause?  I am doing a FSBO and will accept a contingency ONLY IF the buyer has a closing date on their home.  This sounds like a good offer--and so quickly.  Still, the contingency would be a concern.  I understand that in today's market with such a large inventory of homes, buyers can simply move onto the next home for sale.  Thus, getting a back up offer is simply not happening.

  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

a kickout clause is that if you get another offer (cash on the ready) on your home, the contingent buyer has so much time (usually 24-48 hours) to come up with the money. if they don't, you are free to accept the second offer

  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for rmcdonal
Hmmm, I replied, or so I thought, but my message didn't get posted....

I want to thank you all for your input. It is very helpful and you've given me lots of things to talk about with my realtor.

The buyers do not have a contract on their home; in fact, it just went on the market today. They are confident they will have a contract quickly, so that's why they set the closing date 6 weeks out. My realtor is checking to see if their assumptions (and their pricing) are reasonable.

I like the kick-out clause idea, for obvious reasons, especially if the house can keep an "active" status in the MLS. I can understand that the buyers might not like it, but I'm more comfortable with it.

Herrons Homes, The 10-day option period gives the buyers 10 days to get inspections, and they can back out of the contract for any reason during those 10 days. After that, they can't back out without losing their earnest money.
  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for Mark75NYC

zandanel,

 

I believe that what I described is what's fair for both parties.  (The seller gives up the ability to sell to another buyer during the (limited) contingency period, in exchange she has an acceptable offer on her house that the buyer is legally obligated to follow through on once the contingency is met.  That's not nothing.) 

 

I understand it's not specifically "seller favorable" but I was providing my input from the point of view of a prospective buyer, just in order to caution rmcdonal about how the buyer may respond.  Remember - as soon as rmcdonal counter-offers with a response of "I accept your offer IF you add a kick-out clause" the original offer is already rejected and the buyers are free to walk away and say "no thanks, goodbye" and rmcdonal might not be able to get them to re-offer their original terms. 

 

In this market where many sellers are desperate to get an acceptable offer, making a counter-offer (which by definition rejects and cancels the original offer) is not something to be done without careful consideration of how the buyer might see things.

  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

A kick-out clause is not a great deal for a buyer unless they are willing to move forward with the purchase in the event another offer is accepted by the seller. A seller can normally accept any other offer provided it does not have the same "sale & settlement" contingency.

  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

mark and jkonstant: OP didn't ask what was good for the buyer. i agree that the kickout clause isn't great for the buyer, but this is the seller asking. (besides, the buyer is making an offer with money they don't have. exactly what do they expect?) i don't believe that, especially in this market, a buyer can reasonably expect a seller to wait around, even for a month, for another seller's house to sell. the people we bought the house from stopped actively marketing their house for 6 months, figuring their other buyer's house would eventually sell. it didn't. they ended up having to chase the market down.

 

i know you're not suggesting waiting that long, but i would explain to the buyer that given the way the market is right now, you don't want to bank on the idea that their house will sell, nor do you want to give up the chance to find a buyer who can actually close in a reasonable time frame. (perhaps more polite than that) if they refuse the kickout clause, i would suggest politely telling them that when their house sells, if yours is still on the market, you will be more than happy to reconsider their offer.

  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for Mark75NYC

I hear you zandenel.  As a seller I would definitely insist on a limited-time contingency period (around 4 months IMO). 

 

But especially in this market, a seller needs to do what it takes to hang onto a legitimate buyer who is willing to purchase the house at a price that is acceptable to the seller.  This is a buyer's market, and generally in a buyer's markets, buyers get to call the shots a little more because they are in demand.   If the seller turns down this buyer and tells him to come back after he's sold his house, he of course runs the risk that (a) the buyer will find a home he likes better for the same (or less) and (b) that the housing market will continue to sink such that the buyer will never offer that same price again.

 

There's a fine line to walk here, and certainly the buyer will need to understand the seller's point of view as well.  But IMO, any buyer who agrees to commit himself to a contract with a kick-out clause that allows the seller to drop the buyer if something better comes along is a fool.  Unless, of course, the buyer also gets a "kick-out" clause that he can drop the contract if a better house comes along on the market ... but in that case, why bother having a "contract" ...

 

;-)

  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for rmcdonal
I spoke with our realtor. It appears that if we accept the offer with the contingency, our listing will change from "A" (active) to "AC" (active with contingent contract). ACs apparently are less likely to be shown by agents, so accepting their offer seems to mean that our house is effectively off the radar for buyers.

They appear to be priced well, the average days on market for properties in their price range is about 90 days. We are in a large city in Texas, and the market here is not in a tailspin, so we're not scared that our house is rapidly declining in value -- it's just staying a bit flat.

The options we have come up with are to:
1. accept the offer with the contingency and hope for the best (we assume all the risk here).

2. accept the offer with the condition that we keep part or all of their earnest money if they don't close because their house hasn't sold (we both share some risk here)

3. ask for more time to respond to their offer, so that they can test the waters a bit to see if their assumptions about how quickly their house will sell are accurate, and we will have some time similarly to see if there is other interest in our house.

How do these sound and is there other information that would be useful to us, or other suggestions for approaching this?
  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for Mark75NYC

Well I would just point out that even in option #1, the buyer's are assuming the risk that they sell their house and then turn around and find your house has dropped in value but that they're still commited to buying it at their old offer price (when they could be getting it for less, or a better house for that price).   While you (as the seller) might think this risk is small, it's still a risk, especially in this market.  I know it would be on my mind if I were the buyer.

 

Likewise, under option #1, you run the risk that you'd be passing up another equal (or better) offer during the 90 day (or whatever) contingency period.  While you consider this a real risk, the buyer probably thinks this is unlikely, especially in this market. 

 

Thus, under option #1, there are risks on both sides.

 

FYI - as a potential buyer, I would never accept option #2 - there are too many houses out there to bend over backward for yours. But as a buyer, I also wouldn't hold a grudge if the seller just said "Thanks for your offer, but we think it's best for all involved if we avoid a contingent sale, so if and when your house goes under contract, and if our house is still on the market, we'd be happy to try to pick things up with you then."

 

Good luck.

  • September 02 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

This is a problem your local MLS has to address. We have a very subtle letter "K" displayed in the details and you have to look for it. I have kicked out several buyers and have no problem showing homes with this contingency. Only lazy realtors would avoid showing and explaining things in positive terms to their buyer clients.

 

Accept the offer and be sure the buyers move ahead with inspections, appraisal, etc so they are committed and ready to move when the time is right.

  • September 03 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

My recommendation - as many responders before me - is to accept the offer with a 24 or 48 hour kickout clause.  As suggested before, be sure that your agent keeps the status as Active in the MLS and continues to market the home as opposed to under contract which will either remove your home from buyers' views or at a minimum dissuade them from looking.

 

98% of list price is a great offer. Also, in my market, homes that are selling are either brand new listings or homes that have just been reduced in price.  If the home that the buyer is selling is priced properly, then I see no reason not to accept the offer.  The fact is  you do not know whether another buyer will come along.  By accepting WITH the kickout clause included, you get the assurance of the "bird in the hand" and the protection that if another buyer comes along, you can consider their offer.

 

Good luck to you and good job in pricing your home.  You clearly got it right!

 

 

  • September 03 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

it occurred to me while i was takinga shower that the kickout clause is best because you have no idea how easily their home will sell. what if they price it too high, or it needs major repairs, or it's filled with clutter or they decorated in the most bizarre manner possible. (i've seen wallpaper on ceilings)

  • September 03 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for 2 Big 2 Fail

Here's a suggestion for buyers: Don't waste your time making offers contingent on the sale of your house.  We call those offers TOILET PAPER.  Unless your house is already under contract or you have a large sum of money sitting in the bank, don't even bother making offers.

  • September 03 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

manhattan is the man! think about contingent offers for other items. for instance, try walking into a shoe store, picking up a pair of shoes and saying: i will buy these, if i get the money for them, so could you hold them and not sell them to someone with actual money while i see if i can get money for them?

  • September 03 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for Mark75NYC

"Here's a suggestion for buyers: Don't waste your time making offers contingent on the sale of your house. We call those offers TOILET PAPER. Unless your house is already under contract or you have a large sum of money sitting in the bank, don't even bother making offers."

 

Says the guy who bought at the peak of the market and whose unsold, overpriced house has been sitting unsold on the market for over 2 years while steadily sinking in value (we call those houses CRAPSHACKS).

 

 

Zandanel - while I personally would probably not make a contingent offer as a buyer, it's quite different than your shoe store example.  To make your example work, you'd have to add in the facts that (1) the price of shoes is tanking nationwide with no end in sight, and (2) the prospective buyer agrees to contractually obligate himself to purchase the shoes at a set price once he sells his own and gets the money. 

  • September 03 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for rmcdonal
Well, we countered their offer, generally accepting their terms but shortening the contingency period a bit and including a kick-out clause. We'll see how it goes. They had two showings today, with one of them turning into a second showing tonight. Promising, but who knows...

Thanks for your input and guidance.
  • September 03 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for 2 Big 2 Fail

Get a life Mark.  Your nothing but a bitter troll.  Too bad that your not as wealthy as I am.  First you say that prices in Bergen COunty are down 2%, and then you say they are crashing.  Give me a break!  Just sut up.  SHUT UP. 

  • September 04 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for jilibus1
We have been offered a contingency   we live on a lake where values always go up every season  but with winter coming we will take the property off the market for the winter and start over in the spring when things "heat up"  for properties  in our area of northern mn.  I really don't see the benefits of a contingency   I think the potential buyers should just keep trying to sell and we'll will probably be here for them  if they are still interested.  Is this "wrong" thinking.  lb
  • October 04 2014
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I don't think that's "wrong" thinking; one thing a seller needs to consider on a contingent offer is the chances of the contingent home selling at a price that will enable the "buyer" to perform!
  • October 05 2014
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.