How The Contingency Clause Affects You
A contingency clause is a condition or action that must be met in order for a real estate contract to become binding. There are many ways how the contingency clause affects you! In Crested Butte there are many contingencies for the buyers, but few for the seller. For example, a buyer has submitted an offer on a home, but certain criteria has to be met before the final sale. The buyer has the opportunity to terminate at each date for the contingencies if they aren’t satisfied with something. Examples of these can be financing, appraisal, inspections, title issues, etc.
How The Contingency Clause Affects You – When Buying or Selling Real Estate
When receiving offers on a home, there are two usually described- strong or weak. A weak offer can be a lowball offer conditional upon the sale of another property, an extended closing date and dependent upon the buyers securing a loan. A strong offer would be one that doesn’t have many contingencies. It also may be a full price cash offer with a quick close date and presented with an earnest money check. There may many opportunities to buy a property at a lowball price during a distressed real estate market. But when the market has stabilized, those opportunities are rare, ending with a no response from the seller.
Of course most buyers want to buy a home or real estate for the lowest possible price, but also ensure they are buying a quality home. And then the seller wants to sell their real estate for the highest possible price. They also prefer to sell in the shortest amount of time and does not want to waste time on a buyer that is unable or unwilling to buy the property. Put your offers in writing. It is definitely preferred! Verbal offers can backfire, and many sellers resent getting a verbal or a short email offer from a buyer. It does not show much of a commitment from the buyer.
All real estate transactions must be reduced to writing and signed by both parties. The best scenario for the seller would be if the buyer submitted the offer in writing, with the earnest money check and proof of funds or a letter of pre approval from the bank. Therefore, this shows how serious the buyer is. I recommend having that earnest money easily accessible for a quick offer. If the seller likes your offer, then their signature means acceptance. Both parties are then officially “under contract”.
Negotiating Contracts with Contingency Clause
A real estate agent is not an architect, attorney, a builder or cannot give legal advice. Although, you should have a list of specialists that you can talk to, get advice or hire to help during your contingency phase. Hiring an attorney and getting legal advice can help if there are complexities with a transaction, foreclosures, short-sale scenarios or seller financing options in play.
Negotiating Contracts With Contingency Clause – Example
There was a time I represented a buyer of a historical home in town in Crested Butte. It was their dream home, but it didn’t have a full bathroom upstairs where there were two bedrooms. The home would require a shed dormer to allow for a shower to be put in the bathroom. The agent for the seller stated that the seller had tried to get a shed dormer approved by the town, but was turned town.
I contacted an architect that designed many homes in town to double check. They had worked with the architectural review board on new homes and done many remodels. He had a preliminary meeting in which he stated that he would design it so the dormer would not be facing the street, but facing the adjacent home instead. We had submitted a Contract to Buy and Sell with a contingency clause that the sale was dependent on the buyer getting approval for the dormer from the town. The architect ended up getting assurance from the town that his plans would be approved. We ended up closing, getting the full bathroom added and now they are enjoying their dream home!
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I have over 30 years of business experience and am a top real estate agent in the mountain town of Crested Butte, Colorado representing affluent clients who are buying and selling their homes and properties. To see featured properties or search the MLS – visit chriskopf.com.
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