Home Buying in 08536>Question Details

Anita, Both Buyer and Seller in New Jersey

Is your offer weakened if you include a contingency i.e. sale of current residence?

Asked by Anita, New Jersey Tue Mar 4, 2008

I have listed my condo on the market in NJ, and would optimally like to sell it before buying another house. My real estate agent stated that my offer would be weakened and most sellers would not even consider this offer, if I built in a contingency stating that the offer is only valid upon sale of my current home. Is this true? I just don't want to get stuck with 2 mortgages if I buy one place, and have not sold my current place.

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Hi Anita,

This type of contingency can work once you've accepted an offer on your condo, had it pass the home inspection, and had your buyers produce a firm written mortgage commitment with no sale contingency of their own. Once this is all in place, you can shop for your new home. You won't have too much time, but it can be done. Worst case, move your stuff into storage and rent temporary housing for a month or two while you are looking for something else.

But to simply go out now with an unsold unit and make an offer on something? I wouldn't do it. Most sellers will say no, and you're just setting yourself up for heartache if your condo doesn't sell.

Web Reference: http://www.marcpaolella.com
3 votes Thank Flag Link Tue Mar 4, 2008
Wow, I disagree with almost every agent who has posted here, which is unusual. And I agree with Tman, which is dually unusual. This is a buyer's market. With many homes sitting on the market for six months or more, how does a home sale contingency weaken your offer to the point that the seller wouldn't even accept it. I realize it weakens the chance of the deal going through, but to not even accept an otherwise good offer makes no sense to me. The property is still marketed to all other interested parties. If the seller gets another offer the original buyer has to remove their contingency or get kicked to the curb. The seller still sells. Win-win-lose. Regardless of the outcome, it's one of the potential buyers who loses. The seller wins either way so why reject an otherwise good offer from the start just because of a contingency?
Web Reference: http://www.wnyhomevoice.com
2 votes Thank Flag Link Sat Mar 8, 2008
This is probably one of the worst contingencies I can think of right now. I would NEVER advise a seller to agree to it, and I would never agree to it for myself.
2 votes Thank Flag Link Tue Mar 4, 2008
It is true that a home sale contingency will weaken your offer. I always recommend my clients sell their home before shopping for a new home for a few reasons.
1. You will be a stronger buyer
2. After you get an offer on your home you will have a better idea of what dollar amount you can purchase a home for.

If you have any further questions please feel free to contact me. Thanks.
2 votes Thank Flag Link Tue Mar 4, 2008
>>>>> "The buyer w/ a contingency may find himself paying a higher price for a property in many instances in order to get an acceptance. An agent can negotiate a better deal for you from a position of strength...."

That is typical real estate agent garble ..l.o.l...

Translation: don't put any obstacles in front of me because I'm not good at negotiating.
There are contingencies and there are contingencies. Any seller who signs a contract with contingency on the buyer selling their house is INSANE. Even if they're in contract. Period.
1 vote Thank Flag Link Tue Mar 11, 2008

Elvis is correct in his post about my prior comments. Thanks, Elvis, for the clarification and confirmation. My post was about ill-fated attempts to dupe an agent or seller by "burying" a contingency. Most agents will catch this. When they do, the credibility of both the buyer agent and the buyer will have been compromised by an attempt to "bury". The fact that there is a contingency is going to surface. Rather than bury a contingency, it is a better to discuss this upfront and sell the seller on why this offer makes sense.

For a seller, there is no getting around the fact that some buyers and some buyer agents are not going to look at a property once there is a contract in place w/ a contingency. As a listing agent, I need to be candid w/ my sellers and let them know this. As a seller, which would you prefer? A contract w/ a contingency? Or a contract w/ a buyer who does not need to sell in order to buy?

Is is possible to find a seller who will accept your offer w/ a contingecy? Yes. And, more likely, it will be the seller who doesn't believe he/she has a lot of alternatives. If the seller is getting showings and has strong interest, the seller will be more inclined to hold out for a better offer vs. reducing a potential buyer pool.

As a buyer agent, will I represent a buyer w/ a contingency? Sure. But, I would be remiss to mislead a buyer in to thinking that the presence of a contingency did not matter.

You will find some sellers who will look at your offer and others who won't even consider it. There is no getting around the fact that you are a much stronger buyer w/o a contigency. The property you really want might be owned by a seller who won't consider it.....or maybe....he/she will.

If a seller has two offers.....one for a higher $$ w/ a sale contingency and one for lower $$ w/o a contingency........the advice will often and usually be to give stronger weight to the latter. The offer must be reviewed in it's entirety, so this is not a blanket statement. Generally, the seller and the listing agent will favor the lower $$ for a solid deal. A bird in the hand is worth two in the bush. The buyer w/ a contingency may find himself paying a higher price for a property in many instances in order to get an acceptance. An agent can negotiate a better deal for you from a position of strength.
1 vote Thank Flag Link Mon Mar 10, 2008
Deborah Madey, Real Estate Pro in Brick, NJ
Sorry.. not a sports fan... what's a Roger Clemens defense?

And I did read it... read it carefully. And I'd appreciate it if you'd drop the "dismissive" attitude (thanks for stopping by) when conversing with me. It doesn't suit you well. I believe my comments to you have been civil, I expect yours to be civil too.
1 vote Thank Flag Link Sat Mar 8, 2008
Alan May, Real Estate Pro in Evanston, IL
Alan (elvis)

Even though we thoroughly enjoy your Roger Clemens defense..

You need to read before you write .... it has nothing to do with the burying part, it's the convincing of the buyer and seller part that you obviously missed.

But, thanks for stopping by anyway ...

1 vote Thank Flag Link Sat Mar 8, 2008
Yes, a home sale contingency will weaken your offer.....usually quite a bit.

Generally, sellers will take an offer at less money without a sales contingency than an offer many thousands higher with a sale contingency.

Burying a contingency in an offer will only work w/ green agents and is not recommended. Most savvy listing agents will directly ask the question about the capacity to purchase without selling an exisitng home. I even call the loan rep who issues a prequal and ask that question. As a listing agent, I cover tha in discussion w/ the buyer agent and the loan rep. If i find a buyer has attempted to back door and bury this, I share the infor w/ the seller....who then becomes skeptical of the buyer. I don't recommend this strategy.

Many selles will accept a contract from a buyer when that buyer has a sales contract on their home and the contingecy is only based upon closing and proceeds from the sale. In such case, it is common to request a copy of the contract to evaluate it's strength.
1 vote Thank Flag Link Sat Mar 8, 2008
Deborah Madey, Real Estate Pro in Brick, NJ
Your offer is weakened with a home-sale contingency clause, but like Richard said, each case/transaction is different. Most wouldn't consider it, but suppose the owner of the home you like will? It never hurts to ask. When I have a home sale contingency and am representing the buyer, I let them know that it usually means you have to have a stronger $$$ amount. All situations need to be looked at individually to find out what the sellers' motivation is, how much they owe on the house, why they are selling; where they are going, etc.
When a contingency is written with a 30 or 60 day kick out clause (in NJ) it can be marketed as a win/win situation for both the buyer and seller. In most cases, the house never goes under contract so that the listing agent can continue to market it. Then if another buyer comes to the table, you (as the original contract holder) have the opportunity to remove the contingency or lose the house. The terms and conditions are part of your real estate contract which should be reviewed by an attorney to protect your legal interests.
Feel free to contact me via Trulia or my website for additional information or clarification on anything I've written here. Good luck.
Web Reference: http://www.dianeglander.com
1 vote Thank Flag Link Tue Mar 4, 2008
I agree with your realtor's point of view. While I understand your fear of owning two places at the same time, look at it from a seller's point of view -- would you accept an offer on your condo contingent of the sale of another property? The answer is a resounding NO. As a listing agent, I never allow any contracts to be accepted with that contingency -- someone has to take the "leap of faith". That being said, what I usually do is encourage my sellers to actively look at the same time and be prepared, so that when an offer comes in on their home, they know what choices they have and can make a quicker decision on where and when to buy.
1 vote Thank Flag Link Tue Mar 4, 2008
Good morning, in this market you are correct in wanting to sell your home first before purchasing. Most sellers will accept a contingency with a first right of refusal clause. I would be happy to explain the process to you more. This market needs to have the right players in place. Seek an ABR designated buyers representative like myself to ensure you are getting the right information.

talk to ya soon,
George Scott Glenfield ABR,CRS
1 vote Thank Flag Link Tue Mar 4, 2008
Yes, this is correct. The only time that this scenario will work is when the seller is in a position of strength. Meaning that the seller does not have to sell in order to purchase another property. In your case, I would speak to the seller of the property that you want to buy, and present them with this contingency. This is a case to case basis.No two deals are alike, and no two buyers and sellers will agree to these terms.I am currently in contract with a buyer right now on a home that is $1,850,000.00, and the seller took the deal with a 60 day contingency to sell her present home.I am optimistic about selling her current home before the 60 days are up.I also happen to be the exclusive listing agent on her home for sale,so I am working my tail off to get that home sold in time to close on the one in contract.
1 vote Thank Flag Link Tue Mar 4, 2008
Good morning Anita,

>>>>> "The buyer w/ a contingency may find himself paying a higher price for a property in many instances in order to get an acceptance. An agent can negotiate a better deal for you from a position of strength...."

That is typical real estate agent garble ..l.o.l...

Translation: don't put any obstacles in front of me because I'm not good at negotiating.

This discussion isn't about burying anything, it's about stated contingencies ... 90% of all offers have some kind of contingency, agents are amazed when they don't see one ... small little items like financing, home appraisal, inspections, etc, etc .... little junk like that.

Contingencies are a part of real estate contracts and so are the - "renegotiations" ... lets just be honest, thats why agents hate to see them .. it's because the *agents* have to do the renegotiations -and most agents- (no matter what they say) are just not good at negotiating.. it's much easier selling the client.

I understand some agents got very spoiled in the last 6 or 7 years because of being in a sellers market .. it was very easy to say to the consumer "geez, it's only been on the market 25 days and any contingency will blow your deal.." ...... this is a buyers market, now they have to earn their living.

As far as the seller, they will go with the buyer that can hit the ground running with agreed upon figures ...

"That means" ~ the buyer with the credit approval and he can close in 30 days or less - as long as the deal has been properly explained by the listing agent (which in itself is a gamble) .. and "IF" the buyer doesn't have some crazy contingency like having the seller painting the doorknobs purple and every closet Red, White and Blue ....

PS: Deborah, by the way - for future reference ...

contingency is spelled c-o-n-t-i-n-g-e-n-c-y ... not c-o-n-t-i-n-g-e-c-y

0 votes Thank Flag Link Tue Mar 11, 2008

A contingent offer says I will buy you home at this price and terms if and when my home sells sometime in the future. The key is when will your condo sell?

Many sellers want to go and go now. if you home had an offer on it, ready to close or closed you would be in a stronger position to negotiate price and terms. If you home never sells both you and the seller have lost time.

In a contingent offer the seller can still continue to market the property subject to the terms of your offer. However, some buyers and agents will not show or view the propeprty with a contingent offer on it.
0 votes Thank Flag Link Sat Mar 8, 2008
Pam Winterba…, Real Estate Pro in Danville, VA
Oh, and Marc, I completely agree. As a buyer you are just setting yourself up for heartache. I would not, as a buyer's agent, recommend making contingent offers unless your current house was a really hot commodity. However, as a listing agent I do not see the harm in entertaining an otherwise strong offer when we can still market the house.
0 votes Thank Flag Link Sat Mar 8, 2008
I say they are willing and able, just not quite ready. They can still sign contracts, put down a sizable (hopefully) good faith deposit, arrange for attorney approval and a home inspection. After all this they should be quite motivated to sell their own home before a better offer comes in. And like I said, if and when a better offer does come in, the seller still wins.
0 votes Thank Flag Link Sat Mar 8, 2008
how does a home sale contingency weaken your offer to the point that the seller wouldn't even accept it.
A home sale continency shows you do not have a ready willing and able buyer, for one thing.
0 votes Thank Flag Link Sat Mar 8, 2008

>>>> "Yes, a home sale contingency will weaken your offer...Burying a contingency in an offer will only work w/ green agents and is not recommended..."

OMG .. (as he blows his coffee into the computer keys while laughing hysterically) .. then 99% of the agents working in the United States must be green ..l.o.l...

Try finding an agent 12 months ago that ..**wouldn't**.. write a contingency contract based on the sale of the current home, and there's plenty of agents still out there trying to do the same ..

12 months ago you had every realtor from Pompano Beach to Pensacola writing contingency contracts .. then calling their Uncle Sid in New Jersey to give them the listing to their current home..

Lets be honest, they just can't find lenders that will carry the paper right now .. that's the only reason why agents are now doing the "not recommended" dance today... and maybe that's why 34% of the foreclosures have a dual mortgage..?

Anita ... 2 years ago you would have had 300 agents posting "buy now sell now", not anymore .l.o.l.. there is nothing wrong with contingencies, interior changes, moneys in investment programs, etc etc .... but in todays market, waiting for the other shoe to drop (selling your condo) won't help the seller - or especially yourself.

That said, that is an untrue statement that contingencies weaken, decreases or it makes your deal less effective ... the reason why most agents will tell you that, most are not good negotiators and they want the deal to go as smoothly as possible -- remember, it's easier to sell *you* ... than to sell the seller.

Good luck and happy hunting.!

0 votes Thank Flag Link Sat Mar 8, 2008
In fact, you can still make an offer without contingency, knowing that your mortgage banker will not give you a mortgate till you either sell your current condo or rent it out. That was what happened to me, and because my offer did not have any contingency, my offer got the house, but then the mortgage company forced me to rented out my condo, and many people want to rent, so I just rented it.

And, because I got this super low ARM only 3.875%, my rent end up more than my monthly payment, and I got one more house, big house.

Vijay did the same thing and first get out all his equity on his condo at Edison, and then use that as down payment to buy a bigger home in Edison, and rented out his 1br condo.

While he moved to bigger home, he was selling his condo earlier while renting out. He ended up to sell his 1br condo at top price because, he said, otherwise, he could not close. So, the buyer decided to pay fair market price to buy his condo.

Samething as Kelly who bought her $650k house in Edison first, then hold 3 open houses on her 2br condo after getting it painted and upkept. It was sold. These area all recent stories.

Where is your condo located? which town and complex name? maybe I can tell you where your prospective buyer communities area ... One thing you need to remember is that many first time buyers, once buy, they want to close in 4 to 5 weeks due to the fact rental lease expiration, with fewer than 60 days to decide to move out or renew.

So, you need to at least find out some houses that you are ready to move in and out of your condo, or you would be in a very difficult situation like Huan-Ching's friend who sold his Westgate townhouse and buyer wanted to move in by last Xmas, and they really got a panic, since the new home not going to be complete till months later ... very panic experience ... found no apartment want to lease for just a few months ...
0 votes Thank Flag Link Wed Mar 5, 2008
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