Your Contingent Offer Could Be Welcome.
Practically speaking every offer is a contingent offer. Even a cash offer is contingent on the buyer being able to fund the transaction at closing. Non-cash offers include a finance contingency, and most offers include an inspection contingency. However, the term “Contingent Offer” (initial caps for emphasis) refers to a different contingency altogether.
What is a Contingent Offer?
If you need to list your property and it is still an Active Listing when you make an offer to buy another property, your offer on the other property is considered a Contingent Offer. The proceeds from the sale of your current property are needed to pay for the next property. Most Contingent Offers also include other contingencies, some of which I mentioned above.
Can a Contingent Offer be Competitive?
Yes and no. The seller may be unwilling to consider your offer because there are plenty of other buyers out there who will make offers which are not contingent on the sale of the buyer’s property.
However, if the seller has received no other offers and the home has been on the market longer than the seller expected, your Contingent Offer may be welcome. In that case, the first thing of interest to the seller is the property you are selling. If your property is likely to sell quickly, the chances of getting your offer accepted improve.
A Contingent Offer Can Be “Bumped.”
If your Contingent Offer has been accepted and the seller receives an offer that is not contingent on the sale of your home, you can be “bumped.” The “bump notice” asks you to waive THE Contingency of needing to sell your property to buy the new property. If you agree to waive THE Contingency, you are also waiving all other contingencies, such as the inspection contingency. Having received the bump notice, your likely reaction will be to inform the seller in writing that you are bowing out. Fear not, your earnest money will be refunded to you.
Look for Stale Home Listings.
Let’s assume you own a very desirable condo in Seattle, and you are looking for a home in a more bucolic setting. You look and find homes that have gone cold after having been on the market for a while. Some have reduced prices since listed. You make the 50-mile trip north and see some of these homes. You like one in particular and decide to make a Contingent Offer. Your chances of getting your offer accepted and not getting bumped are pretty good.
Make the Bump Go Away.
The threat of getting bumped disappears once the sale of that hot Seattle condo goes Pending. Once you inform the seller of the home that the sale of your condo is Pending you have satisfied THE Contingency. You can’t be bumped anymore. (You could also have waited for your condo sale to go Pending and then make a non-contingent offer on the country home.)
Sell Hot, Buy Cold.
It helps to sell in a hot market and buy in a cooler one. In the greater Seattle area hot and cold areas are not that far apart. In Snohomish County, there are right now 264 single-family homes listed as Pending Inspection and 52 as Contingent. If you are interested in new construction, there are 10 homes listed as Pending Inspection and 13 as Contingent. Builders are more likely to allow Contingent offers.
When you need the money from the sale of your property to buy another one, a Contingent Offer may be the way to go. I’m here to help you make it work on both ends. Learn more about making an offer here.