If you’re a seller with your home on the market, there’s a time to consider a contingency offer and there’s a time not to. A contingency offer is an offer where the buyer says “I want to buy your home but I have to do something first and this offer is contingent upon this other thing happening”. That other thing is typically (but not always) selling another property. Some sellers may think “something is better than nothing”. Well, maybe…but not always. There are a few things that need to be considered before sellers choose to marry this type of buyer.
Future marketability. Contingency offers can seriously put a seller behind the eight ball not being able to do anything else should another buyer present themselves. Or, it is possible for the seller to continue to try to sell to another purchaser by giving the first buyer a right to their property should the seller reach an agreement with a second buyer. But what typically happens is that even though sellers think their home is still out there on the open market, it’s sort of last on the list to get shown by other agents which dramatically affects its salability. The reason behind this is because showing agents don’t want their buyer to get their hopes up on something that they may or may not get. Not knowing the financial capabilities of the first buyer, the second buyer is usually reluctant to challenge and just goes on about their search for another property. OF course they do have the right to pursue but most often, they don’t.
Another issue in trying to attract a second buyer while already having a contingency offer in place is the way agents are allowed to advertise contingent properties to others. We have to replace the word “active” with “contingent” because active means readily available which a home with a contingency offer in place is not. It’s only available if another cannot perform. Showing the property as contingent informs the second buyer that the seller can only sell to them if the first offer falls apart and will let them know formally within a certain time period.
Risk. Sellers should look at contingent offers the way they would any other business decision and risk is part of that decision. Things sellers should know when accessing risk are: how long have they been trying to sell? How many people have seen the house and not pursued? Is the buyer’s home located in a fast sale area? Is there anything that affects the buyer’s marketability of their home? Is their offer price worth some risk? Is anyone else close to writing an offer at this time? How long of a commitment do they want?