Jim Valentine on Real Estate
An offer made to buy a home that is contingent on the sale of the buyer’s home is known as a contingency offer. There are, however, many other contingencies that find their way into an offer thus making just about every offer a “contingency offer.”
Most contingencies are essential to the party that they favor, and it is essential to be diligent about getting them satisfied. The sale contingency allows the seller to know of the buyer’s interest in their home while allowing the buyer to sell their home knowing where they are moving to.
Sometimes the sale is contingent on the sale of another home, a situation we affectionately call a “domino” transaction. They all have to fall in order. If you are involved in a sale contingency be sure to find out how strong the upstream transaction is.
Where are they with loan approval, appraisal, inspections, etc. Are the funds the buyer is putting up readily available? Sometimes they are coming from a retirement account, family member, etc., and they may take a few weeks to free up.
That can lead to an unexpected delay which, in a contingency situation, can cause some grief among the parties. Necessary, or not, it is real, and the resulting stress can cause some strong emotional feelings.
Most contingencies are normal and not really addressed as contingencies even though the transaction is contingent on them being satisfied. These include loan approval. Remember, the home has to qualify (appraisal and condition) as well as the borrower.
Title report will be generated and must be approved. Physical, pest and other inspections need to be completed and approved. Well water quality should be proven, and the septic or sewer line must pass muster.
Sometimes a home is offered for sale contingent on the seller being able to find a replacement home. Once they accept an offer on their home, they go shopping so they know where they are going.
Of course, they are making a contingent offer on homes they are offering on. If owner financing is involved the offer could be accepted subject to the seller approving the buyer’s credit.
Contingencies can include the completion of an improvement, the modification of something, obtaining county or city approval for something, usually related to their intended use, some rely on attorney or CPA approval depending on the transaction and will accept contingent on such approval.
Sometimes a buyer writes on a home they haven’t seen so they know they are making a purposeful trip when they go see the property. This isn’t a bad thing so long as the time frame for their onsite inspection isn’t too long after acceptance.
Most will be onsite within a week or so from our experience. Be sure that the contingencies in an offer you are making or considering for acceptance are reasonably able to be satisfied. Is the price of their home to be sold at or below market value?
Are the time frames for satisfaction of the contingency able to be met? How long are you being tied up before resolution of the contingencies? Is it a reasonable time frame for the nature of the contingency? Contingencies are a way out of an agreement so be sure they are reasonable, and everyone is working diligently toward their satisfaction.
Contingencies aren’t a bad thing in a transaction that has integrity. They are essential for the protection of the parties and serve well for protection against litigation after the close of escrow as there was time provided for due diligence on each and every matter.
When it comes to choosing professionals to assist you with your Real Estate needs… Experience is Priceless! Jim Valentine, License No. BS-03481, RE/MAX Gold Carson Valley 775-781-3704. dpwtigers@hotmail.com .