Like 'em, Love 'em or Hate 'em, we will continue to see contingent contracts. I am talking about contingent upon a buyers home selling. In this market, I see two sides to this coin. 1) nope, don't want them, can't expect the other home to sell; and 2) at least it is a bite, take it and see what happens.
If you are writing a contingent offer for a buyer a few things to keep in mind:
1) Put in a close date, no use of TBD. And use a date as far out as the seller will allow. Be aware of the date and do not let it expire on your client. Once dates on the FRR addendum have expired, the contract is dead. All extensions must be made prior to the expirations.
2) When writing the First Right of Refusal (FRR), be a saavy buyers agent and specify that the 72 or 48 hours do not apply to holidays and weekends, this will allow the buyer time to get financing or a bridge loan if they desire to move forward. Hard to scramble on the weekend!!
3)Talk to your buyer upfront about the possibility of using a bridge loan, IRA's, Stocks, etc IF it becomes necessary. That way if the FRR is called, they will be further down the path.
4) Be careful how you write the addendum. An example: A FRR offer to be removed with evidence of a copy of the HUD and settlement of the buyers home. The FRR is called and buyers have not sold thier home, but could purchase the home with special financing. But because the addendum stated it had to be a HUD, sellers chose to sell to the second offer and could. Always write what you mean: In this case it could have been "Proof of sale and settlement of buyers home (HUD) OR proof of funds or alternative financing allowing buyer to close within 30 days".
5) Be aware that any offer after the one with the FRR only has to be acceptable to the sellers to be able to call the FRR. Terms do not have to be the same, and can even be a lower price!!
6) Some ways to entice a seller to hold out and accept an extension: have the buyer pay the sellers mortgage for the extension period, have a Non-Refundable EMD that graduates and gets larger as time passes, you could even request a large EMD upfront, and write that portions of it become non-refundable as time passes.
If you represent the seller here are some issues you may want to consider:
1) Get as many of the other contingencies (inspection, etc) removed as quickly as possible. The buyers agent may not want their buyer coming out of pocket, too bad. Make it part of the contract that they will be done and over within a reasonable timeframe (10 days?)
2) Do not call the FRR until you have come to a meeting of the minds with the buyer and seller of the second contract. Write the contract "subject to the current buyer of 123 Main Street not being able to remove their contingency with-in 48 (72) hours.
3) When entertaining a contingent contract, ask the agent to show you that the home in question is currently listed, request the comps, review the listing yourself to see that it is being marketed, ask for the marketing plan, including if they have scheduled price reductions and offering any assistance, you may even request to preview to see if it is a saleable listing. Ask if the buyer has enough equity in their home if they need to reduce the price to get it sold.
4) Ask for a non-refundable EMD.
These are just some of my suggestions and thoughts, but with the bright minds here, I'm sure you have run into other situations. Do you mind sharing?
thanks, shelly