- The Washington Times - Wednesday, June 28, 2006

Contingencies in contracts will always exist.

In a seller’s market, even if the buyer writes it with no contingencies, the seller will tack on a few of his own — “must find home of choice” comes to mind.

Even so, when sellers add contingencies, usually they add only a couple that are easily remedied and that don’t cost the buyer much money. When buyers add contingencies, on the other hand, it means the seller may face expenses, such has remedying defects found during home inspection. There is a chance that the house may not sell at all.

Here’s what I mean: A seller in the Washington area writes that he has “drastically lowered” his price, has a great agent and is “very realistic about the market” but that he’s turned down two contingent contracts with unrealistic buyers.

Having lowered the price to 30 percent below appraised value, the two contracts have both been contingent on the buyer selling his or her home before completing the sale.

In further discussion, both buyers, according to this seller, are very unrealistic about the value of their own homes and want to put them on the market highly overpriced.

“They think my house is a great deal because I have lowered my price,” the tired seller says. “Then they write a contract based on the equity they ‘assume’ they have in their home. They want to list it way overpriced. My plan is to just keep lowering the price until it sells. Any advice?”

First, if you’ve already drawn two contracts, then you may have hit the low-enough point. Work on the marketing and seller subsidies upfront.

In addition, before rejecting an offer outright, I would write a counter that the buyer can only list the property for a certain amount. Don’t say, “market value price.” Have your agent draw up a comparative market analysis (CMA) on the buyer’s house and base the price on that.

In addition, ask the buyer to follow the same modus operandi you have — be willing to drop the price every other week until it draws a contract. Write all this verbiage in the “other terms” section of the contract.

Remember: In real estate everything is negotiable.

When a contract comes through in a buyer’s market, a seller needs to remember to keep his or her cool. You don’t need to roll over and play dead, accepting any terms the buyer offers.

Remember: You have a contract in your hand. While the buyers have dozens of other homes to choose from, they have chosen yours because it fits their housing needs. They also obviously like your price, so concentrate on the terms. In today’s market, if your house is priced right, then you only have to focus on terms to get a winning contract on the board.

The challenge of accepting a contingent contract around the country is that the status changes on the multiple listing service from “active” to “under contract/contingencies.” The problem is that with so many homes on the market, 99 percent of buyer’s agents search only “active” listings for their buyers. They rarely seek out the “under contract/contingencies” listings. Why should they? They are obviously in negotiation with a buyer already.

So switching the status may mean your home lingers toward closing while waiting for the buyer’s home to sell. On the other hand, the buyer becomes much more motivated to sell and may be willing to drop the price right away to elicit a quick sale.

The No. 1 contingency in contracts today is the home inspection. Instead of fearing this contingency, the astute seller will conduct his or her own home inspection and fix the problems before the buyer finds something later. Be tough on your own house. If it has an old air conditioner, have it serviced. Make sure all the plugs work properly. If you are a do-it-yourselfer, make sure you have the permits or at least professional inspections necessary to show you did the work right.

The seller who anticipates challenges from a buyer will be ahead of the game. Don’t wait till you “find out” that you have termites — uncover the defect before it’s a surprise. Be willing to accept contingencies but also be willing to negotiate to make it work for you, as well.

M. Anthony Carr has written about real estate since 1989. He is the author of “Real Estate Investing Made Simple.” Post questions or comments at his Web log (https://commonsenserealestate.blogspot.com).


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide