This post came about because of one by Jessica Horton entitled, "Why put a carton of milk on layaway when your old dairy cow doesn't have any takers?" In it she discussed about receiving a lot more real estate contracts as of late with contingency clauses for the sale of a buyer's home with no kick-out clause.
Let me preface this by stating that I make it a point to follow-up and follow through. From the get go I get the buyers information in regard their lender, etc. and put calls through until I hopefully get more information back. For the many that have come to know me, I do not like surprises and I can only gather that my sellers would not be too thrilled with them either.
Considering the present market conditions, I will not take a home off of the market if there is a contingency clause for the sale of the buyer's home. For the purposes here, I'm assuming the fact that the buyer's home is already listed with a real estate professional and priced accordingly for the market. Granted, I would prefer it to be under contract and then obviously feel better about the situation. Of course if that was the case, I would respectfully request all the information as to their buyer's lender and follow through on that as well.
The reason that I'm writing this is not as much in regard to what's just been written, but more so to how this affects your seller's home being shown after the contract is executed.
I have found that the majority of the time the home is basically passed over for consideration and that the showings generally cease or slow to a trickle at the most. I'm not aware of other MLS's, but in the Mid-Florida Regional MLS we can keep the home ‘active' but the first thing that has to be mentioned in the public remarks section is that you have a ‘Contingency Contract' and I usually add that it's a ‘Right of First Refusal' with a certain number of hours denoted. This appears to essentially take the home off of the market.
With the number of homes available in today's market I have to wonder if our seller's are hindering themselves by accepting some of these contracts. Like I've said I try to do my homework, but what about the person that does not? I try not to talk negatively in regard to others in our profession, but are they performing a disservice to their client?
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I'd take contingent offers all day long because it's no skin off my seller's teeth to accept them.
In our MLS, we indicate a status modifier to show it is subject to first right of refusal, but quite frankly, nobody knows what it means.
Mark - I totally agree, just don't know what other way they would go about it.
Jennifer - Wow! I guess that amazes me and I don't understand that! I like that term, 'Bumpable Buyer.'
Marc, I have to admit, I'm one who would pass it up. There are so many homes on the market right now, I don't want to get my buyer's hopes up, and waste their and my time on a home with a right of first refusal. There are easier pickins out there by the bushel!
As a listing agent, I don't like taking them, just for the reason mentioned above. But, in this market again...there are a limited number of buyers and if the price is right and the term is short, it's tempting for sellers. Tough call to make!
Marc,
most contracts presented in my area are out of towner's, so before I even have my sellers consider an offer with a home sale contingency, I want to see that the buyers home is actively listed, I make every attempt to contact the other agent to see what the market is doing in their area. We do not have to change anything in our MLS, Thank Goodness!
but I will say this, there are numerous agents in my area that have no clue as to what a 72 kick out means.
Christopher - I couldn't agree with you more and that is where I stand as well!
Lisa - Yes, we generally use either 48 or 72 hours. But you are exactly right and that is what I do. As I'm going through the plethora of listings for a buyer, it will just click onto the next property if one has a contingency contract attached to it.
Pattie - Good work! That's what I feel a realtor should do for their seller. So, if you don't have to change anything in the MLS, do you have to denote it somewhere in the description that there is a contingency contract on that particular home?
Marc,
actually we are NOT required nor is there an option on our MLS to do that, When an agent calls my office for availability, It merely says (Offer & acceptance- Home sale ) CONTINUE to Show- usually I get a call from the agent directly to try and feel me out..
When a property is "pending" our MLS requires the CKO (contract kick out) designation. With the heavy inventory of homes in this market, I doubt many agents run searchs for "active" and "cko." Personally, I only take buyers to a CKO home if it's in a neighborhood that they really want and there aren't many other homes for sale there. I've also noticed that buyer's love these homes. Human nature perhaps -- if you can't have something, it's way more desirable! Or maybe, if someone else wants it, it must be great!
How about using this as a sales tool to knock those "on the fence" buyers off the fence and get them back in gear! LOL!
Rob - I have to agree with you.
Teri - Interesting, I'll have to think about that!
Marc, To answer your question, I can say nobody knows what it means because a contingent offer in our MLS does not say it is a contingent offer. It states that the status has been modified. Which is confusing to lots of agents.
Can a first right of refusal be bumped by another first right? If first right 1 has a contingency requiring selling their home to by the other, can first right 2 also subit a first right with the same contingency,but at a higher price and bump first right 1?
Anonymous - In answer to your question - Yes! Just because a price is higher, does not necessarily make it a better offer. There are too many factors to be taken into consideration.