When selling your home you want to get as much money as possible in the shortest amount of time. An interested buyer will make you an offer, you accept and everything’s all set for the closing where the house will change hands. Frequently you will find that the offer includes a contingency and you can take the offer without excessive risk if you protect yourself.
A contingency is a legal concept which basically means that if a particular condition is not met, then the real estate contract becomes null and void. In a home sale contingency situation, if the buyer cannot sell his or her house, then the buyer does not have to go forward with the sales contract to buy the new property. If the seller is prepared to accept a home sale contingency, this means that you will not have any certainty as to whether your buyers will in fact go to closing on your house until such time as the buyers have contracted or sold their current residence.
Clearly, such a contingency is in the best interest of the buyer. However it is a fact of life which sellers have to accept if they want to sell their property quickly. Not everyone can afford to buy a new house while at the same time having to carry the financial burden of their existing home. As the seller, you don’t want to pass on a good offer, but if their house doesn’t sell, yours doesn’t either.
Place a time limit on their sale. You need to be fair and realistic by giving them the best chance possible. Generally speaking, a range of between 90 and 120 days is a fair compromise for both parties. At the end of this time period, the contract can be declared null and void at the option of the seller.
You can also incorporate into the contract what is known as a “kick out clause.” This will give the seller the opportunity to continue to market the property, and most real estate agents and brokers will be happy to assist in these efforts. If the seller obtains another satisfactory offer, the existing purchaser will be given a period of time in which to determine whether to cancel the contract or to go forward with the contract. The general rule of thumb is 72 hours. You will not be able to accept a new offer until after the time limit given to the contingent buyer, but you can create a “back up” contract making it clear that the contract is only accepted if the first contract falls through. By incorporating a kick out clause, this permits the seller to continue to show and market the property, while at the same time preserving an interested purchaser who presumably will diligently attempt to sell his own house.
In a perfect world you will get multiple offers and one of these may not have a contingency. They are better to be avoided if possible, but in the real world they are a necessity and multiple offers don’t always happen. Be sure you know the best way of handling a contract by talking to your lawyer and a real estate professional. For more advice and assistance call Helen today at 847.967.0022 or email [email protected].