Profile picture for ycnim

contingency contracts

What info can you provide me about contingency contracts?  What are the pros and cons?  Two friends of mine that are realtors say they do them all the time.  Are they worth doing?
  • July 08 2010 - Nashville
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Answers (17)

Contingent on What? If you are referring to a house sale.  I would recommend that if you do one I would include a "kickout" clause, 24 or 48 hours.  If this clause is called into effect, the buyers will have 24 or 48 depending, to firm up and remove this contingency or else the sellers can move on.
  • November 30 2011
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A good Realtor works in the best interest of their clients, this many times means contingencies in a contract.  If it's important to the client, it should be important to their realtor!
  • November 30 2011
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in new york there are never or ill say very few, (our office 25 years has never done one) a deal based on the buyer having to sell a property. UNLESS their property is CURRENTLY in contract and "looks good" to be able to close. 
  • November 30 2011
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Absolutely. Also write a contingency on financing, and acceptable home inspection.
You never know what's hidden, and the property might not appraise for the sales price.
  • August 16 2010
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Profile picture for ycnim
Thanks everyone.  What great advice!
  • July 11 2010
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Savvy buyers that are moving up or down to a new home should not make offers contingent on selling the current home.  When you have a contract on your current property you should have the contingency that your current home successfully conveys; of course provide the proof to the other parties, you have a contract and your buyer has the funds to close.  In addition on the sale of your current home make the listing contingent on your ability to find suitable housing, giving you ample time to find the replacement property.  In this market have the sale in hand, then make offers to buy.  Good luck on your sale and purchase.
  • July 11 2010
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ycnim - I advise my sellers to accept a contingency contract with a 48 hour right of refusal. This means that if the seller gets another offer, the buyer has 48 hours to remove the contingency. In this market you don't want to tie up your home on someone that may or may not buy your house.
  • July 11 2010
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It depends on the contingency and circumstances.
Example: Sale of home contingency in this market with so few buyers: Probably not a good idea, since it ties up your listing and their home may not sell. Suggest that interested buyers set a very aggressive price for their home and call you when they have a contract on thiers. Continue to market your property aggressively and see if other offers come in. There are caveats, of course. All situations are different.

Example 2: Financing contingency. If it comes with a strong pre-approval (NOT prequalification) letter and short timeframe for removal of contingency; if you are confident in lender's abilities to follow through on preapproval; probably worthwhile to entertain this offer. 

Example 3: Inspection.Most lenders are requiring buyers to have an inspection after flood anyway, so this is probably an offer worth accepting. 
  • July 09 2010
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In a Sellers Market yes to contingencies ...in this market I would not advise without fully understanding the situation to ensure the contingency will be removed quickly.  If not than no to contingencies
  • July 08 2010
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I'm not a fan of Home Sale Contingencies. It hinders the process on both sides of the deal.

As a buyer you are going to have to jump higher and cleaner with your offer in order to get the seller to accept the contingency. In a buyer's market like today, why waste the opportunity to save some money? I say wait until you are in a fluid position to negotiate to your own best terms.

As a seller you risk withdrawing you your home from the open market for an indefinite amount of time. This will increase the days-on-market ratio which will add carrying costs (mortgage payments, taxes, maintenance...). Many sellers don't understand that adding a Sale Contingency to the MLS listing will effectively stop all future showings. Buyer's Agents will see the flag and most will consider it a waste of time to show the property.

This is only the case if your current home is listed on the market without an offer. If you have a purchase contract on your current home, but haven't made it to closing yet, that is a completely different scenario. Once you have a good offer in hand, start searching for a replacement home immediately.

  • July 08 2010
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most offers include some contingencies, ie. home inspection, CCR Review, etc.

  • July 08 2010
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Like many things in real estate this is a judgement call.  There is no clear right or wrong answer, so I would confer with my Realtor.

Also realize just because a seller accepts a contract with a sale of home contingency doesn't mean that the buyer has the house "locked-up".  Most sellers who accept a sale of home contingency insert a kick-out clause. The kick-out clause usually allows the seller to kick the buyer out of a contract if they receive another offer to purchase their home.  It will usually give the buyer a short period of time to remove the sale of home contingency.  If the buyer is unable to remove the sale of home contingency then they are kicked out of the contract.

If you really like the house you may want to evaluate your own home and consider how you might increase your odds of selling.  Are any cosmetic improvements needed?  Is it priced to sell?

Good Luck!
  • July 08 2010
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Contingencies are absolutely normal, although I usually advise my sellers to stay away from contracts contingent upon buyers property sale.
  • July 08 2010
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Profile picture for wetdawgs
If I were selling and an offer came with a contingency about selling first, I would have contingent acceptance of the offer (all other things being okay) - in other words, the house would remain on the market (no "pending" notices) and if an offer came in without the home selling contingency, it would bump the first offer.

So, yes, there are many offers written as you suggest and many counters the way I describe. 

  • July 08 2010
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Profile picture for ycnim
I was referring to when a buyer needs to sell their home first.  With the slow market, a seller would be more open to a contingent contract.  However, the downside is obviously wasted time if that potential buyer doesn't sell their home. 

I am asking as the one selling my house and finding a home I want to buy. 
  • July 08 2010
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Profile picture for Ofe Polack
All contracts have contingencies, as a matter of fact, I have not seen one without any contingencies.  There are time contingencies, there are inspection contingencies, there are financial commitment contingencies, etc.  Trust your buyer agent, they know what they are saying.
  • July 08 2010
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Profile picture for wetdawgs
Which sort of contingency are you thinking about?

When buying,  it is normal to make a purchase offer contingent on a number of factors such as inspection of the property, and ability to obtain financing.

Another contingency some people put into a purchase contract is selling their previous house.   Sellers are not usually very happy with this one in a slow market.

  • July 08 2010
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