What is known as a ‘home sale contingency’ in some markets is known as a ‘subject to sale contingency’ in the Iowa City real estate market. This is when buyers make an offer on a home contingent on the sale of their own home.
When you get an offer on your home for sale in the Iowa City area it will contain contingencies. Typical contingencies are for financing and inspections. These are standard and something you should expect to see on any contract. A contingency you don’t want to see on the offer is the contingency for the sale of the buyer’s home.
In case you’re not clear what a contingency is, a contingency is a condition of sale. In the particular scenario covered in this post the buyers make it a condition of the offer that they need to sell their own house before they can buy yours. Put another way. If their home doesn’t sell, neither will yours. A subject to sale contingency is a game changer. It changes the game from you being in control of selling your home to relinquishing the control to the buyers.
Of course I do realize that although the Iowa City real estate market is improving, it’s still not an easy market for sellers and you’re happy to see an offer. Any offer. But what good is an offer if it doesn’t close? You might think the buyers will be more motivated once they have an offer on a home and be ready to “do what it takes” to get their home sold. That may be true, except you have know way of knowing one way or the other. The opposite may also be true They may feel “safe” in the knowledge that they have an accepted offer and are happy to “sit it out” as they wait patiently for their house to sell. It’s their house and they get to call the shots, even though the sale of your house is dependent on their decisions. Worst case scenario – It could be a complete waste of your time – And time is an important commodity in a real estate transaction… Does that sound like a place you want to be?
As is typical for any rule, there is an exception where as a listing agent I might advise a seller client to accept a subject to sale offer. If the sellers house is a tough sell, for whatever reason and the buyer with the house to sell has a well priced house in a desirable location where homes fly off the shelves, then this might be that big exception where I’d advise a seller to accept an offer with a subject to sale contingency. Even with this scenario I would continue to protect my sellers with advice to accept the offer only when it contains certain conditions. (For instance there would need to be an accepted offer on the Buyer’s house in 30 days or the deal is off).
In the vast majority of cases, accepting an offer with a subject to sale contingency is a bad idea. The rare exception to accept a subject to sale offer needs the finesse of A Good Realtor to advise you on how to ensure you still maintain some control over the situation by covering your back for all eventualities.
Ultimately, 9 times out of 10 the best course of action is to tell the buyers to come back when they’re actually in a position to buy the house. If they’re serious about buying your house then they need to get busy and get their home sold before someone else comes along and snaps your house up!