Tuesday, July 17, 2007

Selling your home in Metrowest MA...don't waste your time with contingent sales and 1st right of refusal

The thought of ever recommending a seller client accept an offer contingent upon the sale of another property is just down right foolish. I don't care what kind of market it is either...seller's, buyer's, or neutral - it makes no difference. It doesn't matter if the offer is full price either. An offer contingent on another property selling means one thing - YOU LOSE CONTROL OF THE PROCESS!! With no guarantees of anything.

How do you know that the contingent home is priced properly? What if it isn't and the seller does not reduce the price? Are you beginning to see the picture clearly here? When you accept a home sale contingency you have taken your home off the market and are at the mercy of the contingent home selling.

What is even more amusing is when an agent presents an offer with a home sale contingency that is rejected and proceeds to ask if my seller client would accept a right of 1st refusal instead?
I find that many agents don't even truly understand what a right of 1st refusal is? When you allow a buyer that can't purchase a home without selling theirs(contingent sale) to have a right of 1st refusal you are doing the seller a tremendous disservice.

If I am marketing a home and a legitimate buyer comes along that wants to purchase this home I don't want to cloud the negotiations by telling them we must wait 24-48 hours(the typical time allowed) to give another buyer their "1st right of refusal". Why on earth would I want to have to call another buyer who doesn't qualify to purchase the house to ask them if they would like to exercise their "right of 1st refusal"? This is pointless waste of time. I have found that there are agents that will allow this because it gives them a small sense of accomplishment.....even though they have accomplished nothing. Giving a buyer who doesn't qualify a "right of 1st refusal" could cause the seller to end up with nothing if the ready, willing, and able buyer walks away out of frustration. To go one step further...what if the buyer exercises the "right of 1st refusal"? Sure you could add language that says they would forfeit their deposit if they did not close as stipulated but is that worth losing the buyer that could have purchased the home without any of this mess?? Is their deposit enough to mitigate a lost buyer? In a buyer's/weak market where prices are falling, it would never be worth the risk.

The only time it would make any sense to accept a right of 1st refusal is if the buyer did not have anything to sell and could step forward to purchase right away if the seller required them to do so.

So If you don't want to lose control of your sale and be stuck with one of these in your front yard.... Stay away from home sale contingencies and right of 1st refusals.

If your home is not selling you can always reduce the price to attract more buyers. I emphasize YOU because the control of the process remains in your hands.

For more opinions, tips, and advice check out Metrowest MA Real Estate . Thinking of buying or selling a home? Sign up to get MLS access to look for homes and track the market.


jason said...

Great post! I am gonna share it with my own blog readers at jason.landbrokr.com ! Thanks.

chad johnson said...

Hello Bill, My name is Chad Johnson and I am with RE/MAX 100,Inc in Louisville,Ky. I have read your blog article on contingent sales. I have to say that I disagree. If handeled correctly a contingent sale has a huge benefit to your client the seller. First of all in a buyers market you can effectivly use the contingent contract to increase the sales price when the next buyer comes along and in my 11 years experience I have found that buyers enjoy bumping or beating out other buyers when buying a home. Second you can via the MLS monitor the marketing of the other home and I have many times recommended price reductions and or sold the property to buyers I have ben working with. I dont believe you can serve your clients by advising them to outright not take a contingent offer. We need to use or expertise and knowledge to give our clients the best possible service available.

Bill Gassett said...

Chad - Thanks for commenting. I am curious of two things - You state that "in a buyers market you can effectively use the contingent contract to increase the sales price when the next buyer comes along." Chad would you care to explain how you get the next buyer if your home is off the market because the seller has accepted a contingent offer? In Massachusetts if you accept a contingent offer the home is OFF the market! You can not accept another offer PERIOD.

Even if it was possible to accept another offer as you mention, how would you be able to increase the sales price of the 2nd offer when the 1st offers information/offer amount is confidential? When in a buyers market do buyers enjoy beating out anothers offer as you mention. I have not seen this. In a buyers market, buyers want the best deal possible, as they should. I do see to many buyers over bidding because they "enjoy" beating anothers offer.

Jenny Bello said...

In New Jersey it is permissable to leave the property on the market when accepting contingent offers.

So after reading this, it makes sense for MA, but not all states have the same laws. So sellers and buyers should always check with their realtor after reading these blogs.

Jenny Bello-Prudential Fox & Roach
Cherry Hill, NJ

Bill Gassett said...

Jenny when you say leave on the market do you mean to accept back up offers? Otherwise what would be the point of a contingent offer? Why would a buyer go to the trouble of doing one if it didn't offer them the ability to tie up the house?

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