Contingent Offers
Ask Phyllis is a blog series of frequently asked real estate questions. Have a question about real estate? Email us here
Dear Phyllis,
While interest rates remain low, we hope to buy a larger home. We have made a couple of offers but keep getting turned down because the other buyers we are competing with don’t have a sale contingency. I know it’s difficult to secure a La Crescenta home because they are selling so quickly. If we sell ours, what happens if we don’t find another home? What do you think is the best approach? Thank you, Paul
Dear Paul,
We are in a red-hot seller’s market, so you have several options:
- Prepare your home before making an offer.
If your home is not yet on the market, get it completely ready to list. Have professional photos taken, prepare property brochures, and complete any other marketing materials. Your Realtor should show the seller and the listing agent that your home can go on the market immediately. Keep in mind that you will not negotiate from a position of strength. Sellers typically accept contingent offers only when the price is very attractive, or the property has been sitting on the market without strong offers. - Use a rent-back agreement.
Many of my clients have successfully sold their homes with a rent-back arrangement. You can sell your home with a 60-day escrow and negotiate the right to rent the property back from the buyer for a specified period. This strategy can give you enough time to find and close on your next home. When I review offers for my sellers, I prefer buyers who are already in escrow on the sale of their current home, provided their buyers have removed all contingencies. This situation demonstrates commitment and motivation. - Sell your home subject to finding a replacement property.
This option often provides the most protection for you. You can list your home with a contingency that allows escrow to close only if you find a replacement home that meets your needs. While this arrangement benefits you, buyers may view it less favorably. They must open escrow, pay for inspections, and order an appraisal without knowing whether the transaction will ultimately close. If you do not find a suitable home, the buyer loses both time and money. Even so, the current shortage of inventory may make it easier to find a buyer willing to accept that risk.
Buying a home with a sale contingency is a complex issue and a conversation best had with a Realtor in person or at least over the phone.
Related Post: Competing in a seller’s market
