Tips for handling contingent offers
Sellers go to great lengths to ensure buyers' home will sell
By Dian Hymer, Monday, December 14, 2009.Financing a trade-up move is far more difficult now than it was before the economic meltdown of fall 2007. Today's guidelines require such buyers to qualify to carry two mortgages, to have verifiable income and have enough cash for a downpayment.
Most of today's repeat buyers can't qualify to carry two mortgages at one time. And they can't come up with a cash downpayment without liquidating the equity in their current home. In most cases, this means they need to sell that home before they can buy the next one.
Offers contingent on the sale of another property haven't been popular in many markets because they're riskier than sales that don't hinge on the successful close of another transaction. Even so, considering current financing constraints, sellers who don't receive offers should consider a contingent-sale offer, but only under the right conditions.
From the seller standpoint, you want to make sure that the buyers are qualified to purchase your home and that they properly prepare and price their home to sell. If you receive an offer that is contingent on a home selling that is in a lower price range than your home, it might be worth the risk. Lower-priced homes have been selling more quickly than the upper-end homes.
HOUSE HUNTING TIP: Sellers need to take an active role in the sale of the buyers' property to ensure that both transactions close. This means making sure that the buyers' home is in good condition, shows well and is priced right for the current market. If the buyers need to sell their home for a certain price in order to buy yours and their price is higher than what the market will support, it's a waste of everyone's time to move forward.
Recently, the seller of a home in San Carlos, Calif., received a contingent-sale offer that was acceptable, but only if she and her listing agent had a say in list price of the buyers' home. The buyers agreed and ended up listing their home at a lower price than they had been planned to ask. The buyers' home sold quickly and both transactions closed. ...CONTINUED
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Submitted by Brooke Kaine on December 15, 2009 - 3:09am.
As a new home builder selling a number of move-up products, we deal with a number of contingent offers. Without question, the contingent property has to be priced very competively. To that end, we often require that the contingent buyer obtain a professional appraisal of their home before we ratify the contract on our new home. This method also determines their level of commitment. Another important marketing factor is having a proven Realtor handling the sale of the contingency. This can sometimes be problematic if the buyer has already chosen a Realtor prior to coming to us. Another key factor is the sales commission on the contingent home. In todays ultra-competitive used home environment, discounted commission rates only serve to minimize interest in the property. We simply won't accept a contract if the contingent property is not offered at a full commission rate. Unfortunately, even with a great price, Realtor and commission rate, today's contingent property usually takes an extended time to sell. And some never do.