Contingency sales can be complicated, but today we’ll briefly outline the process for you so you can be a more informed consumer.
In our current market, we’re seeing quite a few more contingency sales as we transition from a strong seller’s market to a buyer’s market.
What is a contingency sale? It’s a sale in which the buyer is looking to purchase a property, but can’t do so until they sell their current home first. Typically, the proceeds from selling their current home go toward buying a new home.
There are three different capacities of the contingency sale form that buyers and sellers need to consider:
1. How long the contingency period should be. At Amalfi Estates, we typically give buyers a 60-day contingency window in which they can sell their current house.
2. How long it will take to get the buyer’s current property in escrow. The default period in the contract is 17 days, but it depends on whether their property is already listed on the market or if the buyer has yet to list it.
3. The seller’s right to notify the buyer about backup offers. If the buyer writes an offer to the seller, but during the contingency period, the seller gets a backup offer from a different buyer, the seller can give notice to the buyer to remove their contingency if they want to proceed with the transaction. The seller could either have an immediate right to notify or a delayed right, the latter of which can be 17 days or even the length of the escrow period.
We just did an escrow where the buyer’s agent didn’t understand the form and failed to check the delayed right to notify, which gave the seller the right to kick the buyer out of the contract when they got a backup offer on the property. This is why it’s very important to understand the nuances of this form.
If you have any questions about contingency sales or real estate in general, don’t hesitate to reach out to us. We’d love to help you.