May 26, 2006
As the more “normal” real estate market returns to reality, and interest rates makes it more challenging for buyers to purchase homes with 100% financing, the handling contingent sales becomes more important to sellers.
Multiple Listing Service rules vary from region to region. In most local areas, once a seller accepts an offer, your home for all practical purposes “goes off the market”, and is no longer found on the public search engines.
REALTORS® know that there is a generally a 17-day period for buyers to complete their home inspections and obtain loan approval. Once the buyer signs for the removal of those contingencies, we consider the house generally “sold”.
Until then, he home is subject to cancellation if the appraisal fails to meet the sales price, the buyer does not qualify for the loan, of there is no agreement between buyer and seller as to the handling of any repair issues.
There is lack of agreement among the real estate community as to whether or not homes with accepted offers should remain on the “contingent list” for buyers to find on public search engines, or if in reality, the home is sold for at least the 17-day period and should not be left on the active list.
In order to not lose a buyer, ask your REALTOR® to indicate in the comments section that back-up offers are welcome so that agents will continue to show a home with an accepted offer.
Buyers should also ask agents to search homes that are “sale pending” to see if something they like is still in the inspection mode.
Finding the home of your dreams on the “pending sale” list, can be disappointing, but making a back-up offer in case the escrow fails, will put the buyer in first position in the event it does fail.
We are seeing more failed escrows and longer days on the market.
There are ways to structure a contingent sale offer to make it more appealing to the sellers.
Some agents will use a release clause provision which allows a seller to accept another offer and provide for an arbitrary and generally short period of time for the buyer to remove the contingencies and move to the close of escrow as soon as the 17-day period passes.
In the event a more favorable offer is presented, buyers are given first chance to stay in the transaction by removing all contingencies and providing assurance of closing. If they are unable to remove all contingencies, the new buyer can take first position, and the seller starts over again.
It doesn’t make a lot of sense for the offer to contain a release clause until after the 17-day period because the buyer is expected to pay for the appraisal and the home inspection, and it almost “isn’t fair” to cut that period of time short. The schedule of the appraiser and inspector cannot be controlled by the buyer.
The REALTOR® community is not in agreement on how best to report sales, but sellers can be aware of these strategies. Ask your real estate professional for guidance. Also be sure that your agent is a REALTOR®–sworn to uphold the ethics and standards of practice of the National Association of REALTORS®.
Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista and brings a regional perspective to local issues. She can be reached at 805.340.5025