What Is A Contingent Offer?
There are different kinds of contingent offers when it comes to buying and/or selling a house.
- One type of contingent offer is when a buyer puts an offer on a seller’s home but can only buy that house if the home that they currently own sells.
- Another type of contingent offer is when a seller is making an offer on a house contingent on selling yours.
Both of these scenarios can be accomplished effectively. However, if this is the type of sale that you are getting ready to be part of, hold on to your hats because it can be a bumpy ride. There are many moving parts to a contingent offer. Hopefully, you are working with an experienced Realtor that has sold many homes and has been involved with contingent sales before. With this being said, even if your Realtor is experienced and on top of their game, they have to rely on other people to do their job properly for things to move along the way they should.
Choosing The Right Offer
Let’s say you own a home in San Diego. You just happened to receive 3 offers on your house. Two of them are about the same and are traditional buyers. The third one comes in $25,000 more than the other two. The only caveat is that they have to sell a house in Long Beach, California, first, to close on your house. Also, they are a week away from putting it on the market. Which offer is the best? Which offer would you pick?
This can be tricky. Twenty-five thousand over the other two offers sure sounds good. The only challenge is that you have no control over what is going on with that buyer’s house in Long Beach. Although your Realtor here in San Diego is amazing and has done great things to achieve receiving multiple offers, the Realtor in Long Beach is a mystery. You have no idea of what they are doing to sell that person’s home. Also, once they receive an offer, is it a traditional buyer or is it a buyer who has to sell their house to buy the one in Long Beach? This can then become a contingent 3-way offer, and this is not for the weak.
There are great risks, and there can also be great rewards. You will have to discuss the pros and cons with your Realtor, but ultimately, you will have to decide if you have the stomach for this. Is it worth the extra $25,000 that you may receive if everything works out? Maybe yes, maybe no. You will have to make that call. Sometimes the best offer is not always the highest offer.
How Often Do Contingent Offer Fall Through?
This is hard to know because it depends on many factors. Studies have shown that 3.9% percent of all sales fall through, but this is not necessarily because they are contingent. Yes, some have been contingent, but others have been because of the condition of the property—other times, low appraisals, buyers remorse, financing issues or simply because of bad representation. The McT Real Estate Group has closed all of the homes that were contingent. However, I wish I could say that they were all smooth sailing. They have not been, but they have all been successfully closed!
Contingent On Finding A Replacement Property
Then, there is the contingent offer when a seller wants to put their home on the market and only sell if they can find another home to buy. We have also sold many homes this way. However, we have found that many buyers don’t like to put offers on these types of homes. They feel that it may take too long for that seller to find a home. Depending on how picky that seller is, it can take several months. Buyers may lose out on other opportunities. This is not to say that it is not possible. It certainly is. What we suggest is, if you are a homeowner who is thinking of making an offer on a house contingent on selling yours, first contact your Realtor. Let them know what you would like to do. Together, go out and look at a few homes and neighbourhoods that you are thinking about. See if there are any homes that you would be interested in. It is best to look at homes that have been on the market for a long time. In San Diego, this would be more than 30 days.
This means that they are overpriced, and the longer they are on the market, the more motivated they would be to accept an offer from you that would be contingent upon your home selling. By looking at properties, we will then know if it is going to be easy to find a home or whether it is going to be a challenge. You will have a better idea of whether you will want to have this contingency on selling your home or whether you would sell it first, move into temporary rental and then buy.
If you are thinking of moving to a bigger home and have a house to sell in North Park, South Park or any of the surrounding areas in San Diego, call the McT Real Estate Group right now at 619-736-7003. Feel free to check our reviews of what people are saying about the McT Real Estate Group.