In a buyer’s market, it’s common for buyers to submit offers contingent on selling their current home before closing escrow. This typically happens when there is more inventory than demand. In my 35 years of practicing real estate, I’ve found this to be one of the most challenging contingencies because so much of the outcome is beyond the control of both the buyer and seller.
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In most cases, buyers should present a very attractive offer to encourage a seller to accept this level of risk. Simply put, you have to give something to get something.
Best practices for sellers when accepting this type of contingency:
- Make sure the buyer’s home is priced appropriately.
- Include a deadline requiring the buyer’s home to be in escrow by a specific date.
- Closely monitor the marketing activity and progress of the buyer’s home once it’s listed.
- Reserve the right to accept backup offers if the buyer is unable to perform.
While these are all sound business practices, they do not eliminate the seller’s risk. Sometimes this arrangement works out well and creates a true win-win situation when all the pieces fall into place. Every buyer and every transaction is different, so sellers should carefully evaluate all the factors before making a decision.
For sellers who aren’t in a hurry and need extra time to plan their next chapter, accepting this type of contingency can be a worthwhile option.
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