The Ifs, Ands or Buts
Saturday, November 18, 2006
The price was solid, but otherwise the offer that real estate agent Jane Fairweather's clients received for their house last month was far from a good one.
The would-be buyers are also trying to sell their house, and they didn't want to purchase a second residence -- or carry two mortgage payments -- until they found a buyer. So the offer had a catch: Closing wouldn't take place until Feb. 14.
Making the sellers wait four months to close was bad enough. But the real deal-breaker, according to Fairweather: If the buyers didn't sell their house by Feb. 14, the offer would simply disappear, leaving her clients with a home they still needed to sell.
"Here they wanted to string my seller out for basically four months, and then there'd be no guarantee that come February there would even be a closing," said Fairweather, an agent with the Bethesda office of Coldwell Banker Residential Brokerage. "What they were telling the sellers was that they didn't want any risk in this deal. They were going to put their home on the market. If it didn't sell, they weren't going to lose anything. They wanted to shift all the risk from themselves to the sellers."
Offers to purchase homes can include all sorts of requirements for things that must happen for the deal to go through, known as contingency clauses. Many contracts make the deal contingent on, for instance, a satisfactory home inspection or the ability to obtain financing. For sellers, the most troublesome is the home-sale contingency, in which the purchase depends on the buyers in turn finding buyers for their own home.
Such clauses were rare during the real estate boom of recent years. However, as the market has slowed, they have begun to reappear.
Nothing about such a clause prevents a seller from accepting a better offer should one come along. The sellers merely have to give the first buyers the chance to sweeten their offer, perhaps by lifting the contingency, shortening it or raising the price they are willing to pay.
Even with this flexibility, many real estate agents who represent sellers consider such offers last resorts. That's because many buyers who might otherwise be interested in a home will ignore those that have outstanding contingent offers. They would rather not get into a bidding war.
Offers contingent on home sales, then, would seem a good deal for buyers and awful for sellers. But agents and sellers can work together to make contingent offers more attractive.
"Now that the market has slowed, some home buyers are finding that a home seller might accept an offer with a home-sale contingency," said Holly Worthington, managing broker and vice president of the Chevy Chase and Woodley Park offices of Long & Foster Real Estate. "But to convince a seller to take their home off the market, the buyer's agent must make a compelling case."
That compelling case is the key to home-sale contingency offers that work. For instance, Fairweather said that after her home-seller clients received that contingent offer last month, she went back to the buyers and their real estate agent to hammer out a better deal.
First, Fairweather requested that the buyers provide proof that a reputable lender would provide them with a bridge loan -- which would give the buyers cash to make a down payment on the sellers' home -- should the buyers fail to sell their house by Feb. 14. Second, the offer was amended to state that even if the buyers didn't sell their home by that date, the closing would still happen.