Considering Contingencies

Our Multiple Listing Service requires that we disclose the status of a listing. Once a contract is accepted, we must state if it’s contingent or under contract. Even a cash offer will generally include some kind of condition of sale.

Conditions of the Sale

These conditions, like a home inspection or a loan, are common and easily controlled, especially if the home is in good condition and/or sales agents know the loan officer. It’s when a contingency has an outcome that’s hard to predict that sellers must think long and hard about whether to accept the condition.

One of the hardest is the sale of another property, especially when the property is out of the area and the agent involved is an unknown quantity. Take for instance, a home in Volcano Village. I know that market and I will likely know the strengths and weaknesses of the agent selling the property. It’s not difficult to predict the chances of the home selling. If, on the other hand, the property that needs to be sold is in Bisbee, Arizona. I would not have a clue about the chances of predicting a sale.

Managing Expectations

As agents, we generally speak to the agent on the other end about their expectations. We may even do a bit of checking on that agent. To be honest, most agents are emotionally invested in their listings so they aren’t always objective. After checking all that, we can decide to accept that such as a contingency, it’s still a good idea to include a cutoff date by which the house must be sold. If the property doesn’t sell, the sales contingency can be extended or is voidable.

Sellers are wise to consider that while a home is “contingent” in MLS, the days on market keep ticking up. Waiting for a sale can add a lot of time to the process. High days on market can make it seem like something is wrong with that listing. The next agent will negotiate harder thinking the seller is now more motivated. Meanwhile, sellers must pay carrying costs. At times, buyers with properties to sell will even request that sellers take a contingent offer before listing. This requires yet more tweaking of the language in the contract.

Bottom line is that even with strict contractual conditions, when a contingency is difficult to control, it’s also more likely to fail. So, while a contingent offer may work, both parties should carefully consider how the sale of one property to buy the next is a bit more complicated than you may have at first considered.