Contingent offers can be a challenge for home buyers because they are in the process of selling one home while purchasing another.
When homeowners decide it’s time to move to another house, they face the quandary of deciding whether to wait until their old place sells before looking for a new home. Waiting generally makes it more financially feasible to purchase a new home, but you risk having to rush around to find a suitable place to live once your old home sells. And it’s not always possible to wait—sometimes circumstances like a job transfer or a baby on the way demand a speedier move.
What are contingent offers?
Enter the contingency offer, also known as an offer with a catch. You promise you will buy, but only if your own home sells. It’s an option that’s growing in popularity because it keeps you from being locked into a purchase you can’t afford. But it can also cause you to lose your dream home if you’re unable to find a buyer for your own home.
A seller can move on, but only if your contract says so
So, what right does a seller have to ultimately pass on your offer if it’s tied up in a contingency like selling your home? The answer lies in your contract, and each contract is different.
“Whether or not [a seller can] accept a new offer and bump you guys out completely depends on the contract that you signed. You need to go over the details in the contract to see what outs the seller has,” says Melanie Atkinson, a Realtor® with Coldwell Banker Residential Real Estate in Tampa, FL.
Some contingency clauses allow the seller to cancel the contract if you don’t provide a loan commitment within 30 days. Others stipulate that you can’t purchase another property until your home is under contract.
There’s also the 72-hour “kick-out clause,” which requires you to remove the contingency from your offer within three days of the seller receiving another offer; otherwise that seller can “kick out” your contract and move forward with the other buyer who made the better offer.
Courting other offers
If a seller—or the seller’s agent—is still marketing the property to other interested buyers, the seller is required to disclose that there’s an executed contract on the house. But continuing to show it is legal, and Atkinson says it’s in a seller’s best interest to do so. After all, courting other offers is a seller’s contingency plan, something to protect the seller if the sale of your house falls through.
“The contingency may continue until you actually close on the house, and the seller may be able to accept other offers all the way up to that time,” says Phil Lunnon, a Realtor with Lunnon Realty in Lakewood, CO.
So how do you calm your fears about losing a home? If you’re in talks with a motivated buyer for your house, Lunnon suggests removing the contingency in your offer. “If you are confident that the buyer of your home is committed to closing on your home, remove the contingency.”
Of course, that means you’ll be banking on the purchase of your house going through; however, if you’re on the same page as the buyers, removing the contingency on your offer will prove to the sellers you’re committed and improve your chances of closing on the home you really want.
Source: realtor.com