Monday, September 22, 2008

Contingent on the Sale of a Home

Many people find the home of their dreams before they've sold their current house. Living space is very important - they don't want to risk not having a wonderful home, so they don't list their home until they've found the next one. Some risk losing that house, but many place an offer "contingent on the sale of their home."

The offer is in place, and essentially this means they have "dibs" on their dream home. Usually the home inspection is done and negotiated. They don't want to find out that the roof is caving in and that funny crack in the basement leads to a sink hole, for example. Naturally they are not in the best position to negotiate - they are not ready, willing and able buyers yet - but they are in good shape. Price their current home with the market and they are ready to move on. It only takes a buyer to make both deals happen.

The agent writes in a recall - 48 hours to remove the contingency of the sale of a home or show they can financially buy the house or add an extra non-refundable deposit. The recall can be activated by the homeowner of the desired house receiving a bona fide offer in writing with few if any contingencies. Even if it's 5:00 on Friday evening, the clock starts ticking once the notification has been made. Someone will have bought the house by Sunday at 5:00 PM.

Now here is where it gets sticky. What if the original seller takes an offer contingent on the sale of the home from the buyer, and that buyer in turn takes an offer contingent on the sale of a home from another buyer...and on it goes. A couple years ago there were five (5!) houses in a domino effect here in Skaneateles. It was successful in the end, but it was also a last minute deal.

Today we are dealing with more and more contingencies. The buyers are afraid to buy a home and get a bridge loan because of the market. Getting stuck with two mortgages is not pleasant, even when the buyer can actually afford it. Volatility abounds. Take the safe route.

So I hear over and over - three e-mails today alone - about homes around here or in other parts of the country that need to sell. I am totally convinced that somewhere in the depths of Minnesota or Wyoming there is a little home that is on the market. Once that sells, it will trigger a great landslide of home sales.