Hands On The Heartland
Checking The Pulse Of The Kansas City Real Estate Market
I’ve NEVER understood why so many contingent contracts are accepted in Kansas City. In our current real estate environment, contingent contracts have become much more common too. But more common or not, the fact remains they stink as much as they ever have – for both Kansas City home sellers and home buyers. Kansas City home sellers who are working with any type of defined time frame can not afford to accept a contingent offer. Even if the buyer offered 1% over list price, I would not personally accept a contingent offer that is contingent upon the buyer being able to sell their home (possible exceptions listed later). Why is this? Well, I’m darn glad you asked Random Italicized Voice. Because that would mean putting my complete faith in that buyer being able to sell their current home quicker than I’d be able to find a better, NON-contingent buyer for my home when choosing to move on. Never forget that, as a seller, you have control over the pricing and marketing of your home but NO control over how aggressive the contingent buyer may market and/or price the home they’re trying to sell.
OK, I see what you’re saying, but you can just switch the MLS status to Contingent (rather than Pending) and continue to market your home in hopes of locating another buyer, right? Well you sure are an inquisitive one Random Italicized Voice. You see, the problem is that showings will drop off the moment you switch the status to Contingent. Yes other buyers and buyer’s agents COULD still come see your home, but you need to ask yourself “why would they?” See how I turned that around on you Random Italicized Voice? Even in a seller’s market, switching the status to Contingent will cause showings to drop off 80%. Don’t ask Random Italicized Voice, that’s just a guesstimate and I don’t have exact facts to support that number. But trust me, I believe I’m being conservative even with the assumption of a seller’s market. Now I dare you to go and try it in a buyer’s market and see what happens. I just walked through my office and asked two agents if they had any listings under contingent contract. They both did and when I asked how many showings they had since the status was switched to pending, they both said NONE.
Ok, so we see that it’s a bad idea for sellers to consider a contingency but that must mean it’s a GREAT idea for Kansas City home buyers, right? You’re forcing me to make this post longer than I planned Random Italicized Voice. The answer to that is maybe, maybe not. IF a seller will consider a contingent offer, you can bet that seller is going to start throwing out demands like: (A) there will be a 72 hour kick out notice should a better buyer come along, (B) the buyer MUST conduct inspections within 10 days (and spend hundreds of dollars in the process), irregardless of whether they’re able to ultimately close on the property, (C) the buyer must have loan approval within 30 days INCLUDING paying for the appraisal to be completed, irregardless of whether buyer is able to ultimately close on the property, (D) the buyer’s current home must be listed with a reputable listing agent/brokerage (absolutely no for sale by owner), (E) the buyer must provide a higher than typical earnest deposit, and last but not least (F) the buyer better not be considering making less than a full-price offer with that contingency.
So in other words, home buyers are advised to NOT make a contingent offer and instead get their current home under contract (and closed if they want absolute peace of mind) before moving on and being able to make a NON-contingent offer on the home they want. Yes, Random Italicized Voice, I realize the home may have sold to someone else in the mean time. That’s life. A wise man once told me, “Don’t fall in love with it until you own it”. Or maybe that was a fortune cookie you got at the China Star Super Buffet . I’m done responding to you Random Italicized Voice.
Note: This article refers to contingencies where a buyer’s current home is not yet for sale, not yet under contract or is under contract but not yet on solid ground. A contingent offer could make slightly more sense under the following exceptions:
Exception 1: the buyer’s current home is (A) already under contract with a buyer, (B) that buyer already has received their full loan approval including an acceptable appraisal coming in, (C) that deal already has an accepted Resolution of Unacceptable Conditions in place, and (D) that home has a closing date that works/coincides well for both sale transactions.
Exception 2: if a seller is simply testing the waters and doesn’t care whether the home ever really closes, then a contingent offer may be alright – they just shouldn’t call me to list their home.
Exception 3: if a seller is really desperate with little to nothing to lose by trying it – for example, they’re about to be foreclosed on – then taking the gamble could be a viable last ditch effort.
Exception 4: if a buyer views the home as a one-of-a-kind home, then paying near full-price – or even above full price – may make sense to get a contingent offer through.
Exception 5: if a buyer finds a home priced well below market value then paying full price – or even above full price – may make sense to get a contingent offer through.
Posted by Jason A. Brown
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