Selling a home can take you on a wild ride, mainly because you’ll be meeting different people with different counter-offers. On the bright side, getting various offers may increase your chances of getting a better one than you set initially. Hence, it is important not to get overwhelmed and go through each of them one by one.
One of the few things you need to watch out for in a buyer’s offer is the home sale contingency. In this article, you’ll learn more about home sale contingency and how you can soften its risks towards you as a seller.
What Is a Home Sale Contingency?
To simplify it, a home sale contingency is a clause within a contract that states that the buyer will only proceed with the purchase once their existing home is sold. This is usually common among buyers who don’t need a loan and plan to buy your house for cash.
There are different types of contingencies, but the home sale contingency is among the most “disliked” because you (the seller) can rarely do anything to expedite the sale of your buyer’s current home. Unlike repair contingencies where you have control over when the necessary repair works are carried out and done, a home sale contingency gives buyers full power over when they’ll purchase your home. Not very exciting.
For Sellers: Is it Good News or Bad News?
Home sale contingencies are generally risky to home sellers. This is because the clause allows your buyer to back out or terminate your contract even after months of you waiting. There is basically no guarantee. Although you can legally advertise and entertain other potential buyers while under contract, it can reduce your chances of getting other offers because who would want to spend time on a home that may not be theirs in the end?
On the flip side, though, home sale contingencies aren’t always bad news for some home sellers. When a home seller is unsure about selling their property and would like to find other ways to save the house, a home sale contingency wouldn’t be a problem.
How to Mitigate the Risks of a Home Sale Contingency?
Don’t get us wrong; If you prefer being paid in lump-sum cash, being open to a home sale contingency is one of your many good options. But we do encourage sellers to be careful with the contracts they accept. To ease the risks of a home sale contingency, here’s what you can do:
Is the Buyer’s Home On the Market Already?
First thing’s first, if there is a home sale contingency, it would be better if your buyer’s current home has been listed already. This helps you avoid false promises and tells you how serious the buyer is to purchase your home.
“On the Market” technically means that the home is listed in a Multiple Listing Service (MLS) that’s only accessible by licensed real estate agents, brokers, and realtors. This is a more reliable approach if your buyer is proposing a home sale contingency because it means that they have all the professional help they need to sell the home.
Buyers selling their home on their own (FSBO) can still propose a home sale contingency. However, you have to be more cautious because the FSBO approach depends on your buyer’s willingness to sell immediately, availability to attend to the requirements, and skills to negotiate quickly with their buyers. Hence, it would be better if your buyer worked with an agent to sell their house.
How Long Has It Been On the Market?
Being on the market for too long has a lot of disadvantages. That’s why some agents recommend taking a listing down and then relisting them again. If your buyer’s current home has sat on the market for months (or even years), it could be because there’s something wrong with the house, the price, the location, or your buyers themselves.
If your buyer is having problems selling their existing home, this could delay their purchase of your home even more. Therefore, it would be better to accept a home sale contingency if your buyer’s home is still fresh on the market. Or, look more into their chances of a sale if the house has already been on the market long.
How Are the Chances of Sale?
Even if your buyer’s home is already on the market for months/years, it still can sell with the right strategy and the right market conditions. You can ask your buyer where they are at with the home selling process and what they are doing to hopefully sell the house faster. It’s like giving them the benefit of the doubt. You can consult with your agent whether your buyer is on the right track and see if it’s worth the wait.
Ask for Non-Refundable Earnest Money
Earnest money is cash deposited in escrow representing the buyer’s good faith to purchase your home. Earnest money can be subtracted from the total purchase amount once the sale has pushed through. On the other hand, earnest money can also be non-refundable if your buyer doesn’t meet certain criteria. For example, if your buyer fails to sell their current home within a specific time and walks away from your contract, you get to keep the earnest money. This is basically to cover the opportunity cost of letting you wait for nothing for a long time.
If you’re one of those who disagree with a home sale contingency, but you need to sell your home ASAP already, you can also explore selling it to us at Spire Home Buyers. Spire is a professional home buying company that buys houses in Fort Valley for cash. We buy houses as-is, and we don’t have very complicated contingencies because we have the means to buy your home fast. If you’re interested, learn more about what you can get by calling us at (678) 318 – 1801 or leave us with your contact information below.