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AN INTERESTING UPTICK IN "CONTINGENT ON SALE" CONTRACT OFFERS!

There seems to be an interesting trend here in the Chicago IL Real Estate Market - somewhat of an irritation to home sellers and their Listing Agents. 

More often, buyers are writing the purchase of their new home contingent on the sale of their existing property - home or condo.  In many cases, the offer on the new home is tendered before the current home is even listed on the open real estate market, and on the Multiple Listing Service.  In cases where the home is already listed for sale, the listing price is often too high, and the staging of the property for sale inadequate. 

Often times, the offering price on the new house being considered is woefully low.  In essence, the prospective home buyer wants their cake, and eat it, too.  They want the opportunity to try to sell their home for the highest possible price, despite the fact this price is often unrealistic.  Then, in this changing market, they want to try to steal the new place, at an unrealistically-low level.

As a seller, accepting a contingent offer poses a couple of problems.

First, they buyer's home might not sell quickly, especially if their price is not set right, or their home staging not done correctly.  When the market was more robust, a couple of short years ago, we at Dean's Team were able to counter this, and protect our seller clients, by negotiating the time to sell to only a couple of weeks of market time.  If it did not sell during these two or three weeks, the seller can refuse to extend the contingency, terminate the transaction, and re-market the property new.  With more buyers on the market, and fewer properties to choose from, this strategy worked well.

Today, however, listings inventory is high, and, for many home sellers, buyers are few and far between.  The temptation for many sellers is to lower their standards and accept some offer, even contingent, if the price can be negotiated by their Listing Agent at a higher level.  Problem is - if the buyer's old house house doesn't sell, or is unlikely to sell, the accepted contract is not very solid at all.

The second reason has to due with visibility on the market.  Here, in late 2007, a seller does not want to take any action that will negatively impact market visibility on their property.  Far longer prevailing market times, coupled with the higher levels of property inventory compared to even a few months ago, exasperate this problem.  If a seller accepts a contingent-on-home-sale offer, the Listing Agent is compelled to mark this contingent status on the Multiple Listing Service.  Then, many Buyer's Agents, unsure of the solidity of the marked contingent deal, avoid showing the seller's home.  This could severely dampen the seller's prospects for selling their home, as an unknown number of Buyer's Agents may be avoiding showings - and you never know if the buyer being shunned away from your house is that one, perfect buyer most likely to buy, at a realistic price.

Contracts contingent on a CLOSING of another piece of real estate (in other words, the buyer's property has already gone under contract, and it is just waiting to close, usually represents a very strong deal.  The buyer needs a place to move in this situation, and is less likely, in our experience, to mess around with unwarranted inspection requests, repairs, or extensions, given his tight time frame.  Further, these contingent-on-closing buyers are usually better financially qualified, as their money to purchase the new house will not be tied up in the equity of the old.

If all this confuses you, just let us at Dean's Team know - we'll be happy to better explain, on the phone or in person.

DEAN'S TEAM LEADER,

DEAN MOSS

Posted: Monday, November 12, 2007 8:55 AM by Dean's Team

Comments

BlogChicagoHomes.com said:

Good Morning, Everyone! There seems to be an interesting trend here in the Chicago IL Real Estate Market

# November 12, 2007 9:03 AM
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