Monday, October 01, 2007

Are Contingent Offers Bad?

I was just reading some comments about how contingent offers on a home can be bad and put the seller at a disadvantage. Contingent offers typically mean a buyer can make an offer on a home, but must sell their home first. The writer mentioned the normal reasons why... your home won't be shown as much; you will typically have to wait for their buyer's buyer to find a buyer; You might be willing to take a little less for your home so you don't have to wait...and several others.

I have been selling real estate for over 15 years, helping over 120 families a year buy and sell real estate. Let me share with you my thoughts about automatically assuming a contingent offer is a bad deal...because it is not. If you have the right, experienced agent working on your behalf, it could be a VERY prosperous deal for you.

Here is my response:
I totally disagree with sellers being at a disadvantage with contingencies...and I will tell you the other side.

1) in many larger priced home, a buyer is going to have a home to sell to get thier equity. If you have a home that has been on the market, and a buyer can only write a contingent offer, you might be in a better position to get them under contract NOW and get the terms locked up. If you make them wait till their home sells, they may find a home they like better, because they will continue to house shop if you don't take their contingent offer.

2) if their home is priced to sell, they could be a more valid buyer than the other one you have (no one). As a listing agent we will require the buyer agent to submit a CMA of the buyers home to evaluate if they are indeed priced to sell. If they are, this could be a very lucrative offer...because you can ask a buyer to pay more for a home and counter offer bigger prices or terms when the seller is willing to take a contingent offer. Buyer's typically pay more for the home to 'inconvenience' the seller a little.

3) Contingent status typically is a default with Active homes on MLS. The only buyers who don't look at contingent offers, are other buyers who have homes to sell and would be contingent as well. The cash buyers and non-contingent buyers still look at contingent homes because typically those offers can be bumped out. Which in turn helps your seller get a better price as well, because they typically won't accept much less than the higher priced contingent offer they negotiated.

4) Very seldom is there a chain reaction. Obviously the higher priced the 1st home is will determine if the others will have a home to sell.

5) It is good advice to see if you can get the buyer to buy non-contingent, but if it means they will have to walk, you should at least consider it. This of course does not apply when a market is extremely strong. But if you are working in conditions that are typical accross the country, I think you might be giving the consumers, and agents some not so good advice.

I have been explaining the benefits of contingent offers to my sellers for over 15 years, and I don't feel like any offer we have ever taken put them in a worse postition than not taking the offer originally.

When you are representing a buyer, I can explain how accepting our contingent offer is great if they don't want to take a contingent offer. Unless they enjoy cleaning and rushing out of their home 5-10 times they can relax if they take our contingent offer. 6-7 of the 10 have homes to sell. If you accept our contingent offer, all the contingent buyers (whose offers you really don't want to take anyway) will quit coming to kick you out of your house for 1-2 hours ever day.

So, if you are trying to sell your home in today's market, you might want to contact The Korn Team to evaluate your particular situation. If you are wanting to buy a home in this market and you have a home to sell, and you really need to get your equity out of your current home to buy... then you must absolutely contact our team of specialists. We are watching WAY TOO many homebuyers putting themselves in HUGE financial stress by buying homes non-contingent when they really should sell thier home first. Let us show you how to get your offers accepted and how the seller will benefit by accepting your offer.

Brad Korn
The Korn Team
Serving Greater Kansas City (and Lincoln, NE)
816-224-KORN (5676)