Apple Valley Ohio Lake Community by Sam Miller

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Home Sale Contingency Offers with Bump Clauses

In your marketplace is it common for home buyers to make purchase offers that are contingent upon the sale of their existing home?  In Knox County Ohio the home sale contingency offer if done correctly can be a true Win/Win for both the buyer and the seller.  The challenge is that so many agents and buyers don't put themselves in the seller's position and this becomes a no win for anyone.  The reason this becomes a no win is because when a buyer or agent create an offer that is written stictly to benefit only the buyer...the seller in most cases says get lost or requires the deal to be non home sale contingent.  There has to be something in the deal for everyone or "No Deal".

Some mistakes that many buyers and agents make is that they attempt to negotiate their offer as if they were not home sale contingent.  The problem with taking this approach is that a home sale contingent deal does not offer the seller a solid guarantee that this home sale contingent buyer will actually buy their home.  Many times a buyer who writes a home sale contingent offer asks to delay their home inspection contingency until the buyer gets an offer on the sale of their current home...this also weakens the buyers position because once again the seller is less likely to see a successful sale with this buyer actually take place.  If the seller is skeptical that a successful sale is unlikely they are less likely to entertain this type of offer.

With the recent changes in the housing market home sale contingent offers will regain popularity and can become very successful if agents and home buyers give these types of offers some extra thought.  When negotiating an offer make sure you have a letter of financial preapproval for your buyer with as few conditions or contingencies as possible.  By providing this you are telling the seller that you are a capable buyer.  Contingency contracts need specific language that deal with allowing the seller to continue to market and show their home to other potential buyers.  This is a key factor because it gives the seller a feeling of having some security and a feeling that they do have some options.  When the seller feels a sale will happen with a home sale contingent buy they are more likely to accept these type of offers.

Happy Selling and don't discount the home sale contingent buyer because they need our help and they make up a huge segment of the current housing market! 

Comment balloon 8 commentsSam Miller • March 12 2008 11:35PM

Comments

It is not common in our market place.  I would (almost) never advice my sellers to take a contingency for a lot of reasons but the main one is that our MLS requires that you then change the status to contingent which is not searched for by many buyers agents, buyers, or public sites.
Posted by The Michael Pierce Team, Kansas City Real Estate Experts (Better Homes & Gardens Kansas City Homes) almost 12 years ago

Michael - Our market does not require the MLS status change so we get just as many showings and it motivates the first offer to bust their tail to get an offer on their home.  Many cases these buyers who are home sale contingent become extremely motivated especially as interest rates show signs of increasing.  I have worked out 4 home sale contingency offers that have already closed this year.  I honestly believe that this market is gong to be almost as big as the first time buyer market this year. 

Does your market have "Instant Death" contracts?  That may be another option for you if the MLS status is an issue. 

Posted by Sam Miller, Knox County Ohio Real Estate Specialist (RE/MAX Stars Realty) almost 12 years ago
Sam, you have a wonderful way of explaining topics--- a wonderful asset! If I'm representing the Seller, I always try to get a 1st right of refusal clause. I have several out-of-town Buyers right now that need to sell their existing home, and several that have already had to move here for work, and are renting somewhere while they await the sale of their former home. The best scenario I've had is some out-of state Buyers that listed their home with one of these companies that 'wil BUY IT if it's not sold in 90 days. Great!. So we can write  the contract, and know the maximum wait time. Thanks for sharing.
Posted by Mara Hawks, Inactive-2012 REALTOR - Homes for Sale Auburn Real Estate, AL (First Realty Auburn ) almost 12 years ago
Mara - Thank you so much for your kind comments.  Your use of 1st right of refusal is a great way to get the transactions started and when we combine these types of agreements with 24 hour buyer notification  there is truly no loss of activity providing your MLS doesn't flag your listings as a sale pending.  I have friends who are in markets where they utilize a contract addendum that has been coined "Instant Death" which means the seller can accept a home sale contingent offer but if another non home sale contingent offer is accepted by the seller the first deal automatically is void and the first buyer is notified.  This type of addendum may become very popular in all markets in the very near future. 
Posted by Sam Miller, Knox County Ohio Real Estate Specialist (RE/MAX Stars Realty) almost 12 years ago
Sam - out MLS has listings PENDING but also UNDER CONTRACT--- which is pretty much our local way of indicating a 1st right of refusal clause attached. It really does keep the property on the market, so best for the Seller. Thanks again for a great post!
Posted by Mara Hawks, Inactive-2012 REALTOR - Homes for Sale Auburn Real Estate, AL (First Realty Auburn ) almost 12 years ago
Mara - Does either the Pending or Under Contract remove it from active status in Realtor.com?
Posted by Sam Miller, Knox County Ohio Real Estate Specialist (RE/MAX Stars Realty) almost 12 years ago
Sam - the Pending definitely disappears (I just tried looking for properties that went pending this last week); Now that you ask, it might only be a local thing where we put a house under contract & leave it on the market. Then, when an agency wants to show it, we let them know that it is "under contract w 1st rt of refusal"... In our office's weekly listings printout, the notes will say "pending" or Under contract"... So they do still show up on Realtor.com
Posted by Mara Hawks, Inactive-2012 REALTOR - Homes for Sale Auburn Real Estate, AL (First Realty Auburn ) almost 12 years ago

Your market is similar to our market as we do not want to adjust the status until the buyer has removed the contingency.

Posted by Sam Miller, Knox County Ohio Real Estate Specialist (RE/MAX Stars Realty) almost 12 years ago

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