Accepting Offers Contingent on the Sale of a Buyer’s Property – A Caution and Opportunity

Surfing bad conditions makes you a better surfer.

The landscape of the real estate market is no stranger to volatility. It operates in constant flux, and as we currently find ourselves riding a less-than-ideal wave, it’s imperative for both consumers and real estate agents to adapt and evolve. Prices are on a downward trend, interest rates are rising (though showing signs of stability), inventory is limited, and the number of sales is experiencing a decline. In these challenging times, both buyers and sellers must navigate the market strategically, and one interesting development is the resurgence of conditional offers.

But don’t worry. Learning to surf in difficult conditions makes you a better surfer!

Conditional offers, once again gaining prevalence, offer a silver lining amid the market’s turbulence. For buyers, it provides an extended window for inspections and thorough due diligence. Sellers, on the other hand, benefit from a potentially less stressful process, as conditional offers often lead to higher completion rates. However, the specific condition of a buyer selling their existing property requires careful consideration.

Accepting offers contingent on the sale of a buyer’s property is not inherently negative. It signifies the buyer’s commitment and financial capability to finalize the purchase. Yet, given the current market conditions, real estate agents representing sellers need to approach such offers with a discerning eye. In these situations, it becomes crucial to delve into the buyer’s motivations and the property they intend to sell.

When faced with an offer contingent on the sale of the buyer’s home, thorough questioning becomes a key element of due diligence. Conversations with the buyer’s agent should include probing questions such as:

1. Details of the Backup Property:

   – What is the style, condition, and overall desirability of the backup property?

   – Is it a style favored by current buyers in the area?

2. Location and Market Trends:

   – Where is the backup property located?

   – Is it in a stable, growing, or declining area?

   – What are the property’s shortcomings, and how might they affect its marketability?

3. Listing Information:

   – Is the backup property already listed on the MLS?

   – If not, when is the planned listing date?

4. Market Performance:

   – If listed, how long has the property been on the market?

   – What is the average time on the market in that location?

5. Pricing Dynamics:

   – What is the price of the backup property, and how was this figure determined?

   – Request to see comparable sales data and the rationale behind the pricing.

6. Marketing and Interest:

   – How many showings has the property had?

   – Have there been any offers, and if so, why were they not accepted?

In short, is it a good bet?

By addressing these questions, a comprehensive picture of the buyer’s property and its market standing emerges. This due diligence is essential, especially in a slower market where properties may linger on the market for an extended period. Real estate professionals must weigh the potential risk and time involved in the sale of the buyer’s property against their seller’s needs and circumstances.

In an environment where quick sales are not guaranteed, it’s no longer prudent to accept an offer without a thorough evaluation. The slowdown affects everyone, and the fate of the buyer’s property becomes intertwined with the success of the overall transaction. Agents must act as informed navigators, ensuring that the acceptance of a contingent offer aligns with the best interests of their seller clients.

Furthermore, real estate professionals should encourage transparency and assertiveness in negotiating timelines. If a buyer’s property is not yet listed, establishing a clear schedule for its listing becomes imperative. Additionally, understanding the pricing strategy and the marketing efforts undertaken for the backup property offers insights into its market viability.

In essence, the acceptance of an offer contingent on the sale of a buyer’s property demands a comprehensive risk assessment. The days of relying solely on hope for a quick sale are gone. Real estate agents now play a crucial role in safeguarding their clients’ interests by delving into the intricacies of these contingent offers, ensuring that each decision is well-informed and aligned with the unique dynamics of the current real estate landscape.

While the real estate market may be experiencing a downturn, it’s essential to recognize the opportunities within these challenges. Conditional offers present a valuable avenue for both buyers and sellers, but their success hinges on meticulous evaluation and strategic decision-making. As we ride this wave of market fluctuations, embracing a proactive and informed approach will undoubtedly position real estate professionals and their clients for success in the long run.

Looking for guidance on how to best advise your clients? I’d be happy to coach you through it. Email me and let’s set a time to chat.