In Crested Butte, Colorado, like in most areas, there are numerous contingencies or “outs” for the buyer, but very few for the seller. What exactly is a contingency clause? A contingency clause defines a condition or action that must be met in order for a real estate contract to become binding. In short, it means that a buyer has submitted an offer on the home but certain criteria must be met before the final sale. The contingencies all have dates assigned to them, and at each date, the buyer has the opportunity to terminate if in their sole opinion they are not satisfied with something (title issues, inspection, financing, appraisal, survey, HOA docs, etc.).
In the real estate world, offers are generally referred to as “strong” or “weak” depending on the contingency clause attached. A very strong offer would have few contingencies and may be a full price cash offer, presented with an earnest money check, and with a quick close date. A weak offer would be a lowball offer conditional upon the sale of another property, an extended closing date, and dependent upon the buyer securing a loan. In a distressed real estate market, it is common for sharks to crowd the real estate waters, and there may be many opportunities to buy property at lowball prices. When the market has stabilized, these opportunities are few and far between, and lowball offers with contingent clauses typically result in the expected response from the seller — no response.
The buyer wants to buy real estate for the lowest possible price and ensure they are buying a quality home with no surprises. The seller wants to sell real estate for the highest possible price in the shortest amount of time, and does not want to tie up the home with a buyer who is perceived to be unable or unwilling to buy the property as demonstrated by the provisions in the contract. A serious offer should be in writing, and all real estate transactions must be reduced to writing and signed by both parties (those who have the authority to do so). Verbal offers can backfire, and many sellers resent getting a verbal or a short email offer from a buyer because it does not show much of a commitment from the buyer. The seller would rather see the whole shopping list and what the buyer’s total offer entails, contingency clause and all! It is always best to submit the offer in writing with the earnest money check, and proof of funds and/ or a letter of pre-approval from the bank so the seller knows you are serious. It is a good idea to have your earnest deposit money in an easily accessible account; this will enable you to move fast on an offer if necessary. If the seller likes the offer, then their signature means acceptance, and both parties are officially “under contract.”
Negotiating Contracts with Contingency Clause
I represented a buyer of a historical home in town. This was their Crested Butte dream home, but it lacked a full bathroom upstairs where there were two bedrooms. This home was located on a corner in the Crested Butte historic district and would require a shed dormer to allow for the headroom to put in a shower in the bathroom. The agent for the seller said the seller had already approached the town previously and, per the architectural review, they were turned down. Wanting to double check, I contacted an architect that has designed many homes in town and who has worked with the architectural review board on new homes and many remodel projects. I got him involved and he said he thought he could get it approved because he would design it so the dormer would not be facing the street (bad) but rather facing the adjacent home (good). We submitted a Contract to Buy and Sell with contingency clause that the sale was dependent on the buyer gaining approval from the town for the dormer. As we were moving through the other contingencies, the architect had a preliminary meeting and got assurance from the town that his plans would be approved. He subsequently got the plans approved, we closed, the buyers had the dormer and full bathroom added, and are enjoying their home in downtown Crested Butte.
A real estate agent is not an architect, builder or an attorney, and cannot give legal advice. However, a good real estate agent will have a list of specialists you can talk with or hire, and it is recommended to consult specialists during your due diligence period either before submitting an offer or being under contract, or during your inspection contingency phase. It can be helpful to get legal advice and hire an attorney, especially if there are complexities with the transaction, seller financing options in play, foreclosure or short-sale scenarios.
How can I help you? I have over 30 years of sales and marketing experience and a top real estate agent in the mountain town of Crested Butte, Colorado representing affluent clients who are buying and selling their home and ranch properties in the mountains. To see featured properties or search the Crested Butte MLS – visit chriskopf.com. How is the Real Estate Market doing? Click this link to see my monthly Crested Butte Real Estate Market Reports. Whether you have questions about submitting an offer with contingency clause or simply have questions about the area, I appreciate the opportunity to earn your business and be your Crested Butte Real Estate Agent.
Chris Kopf, Coldwell Banker Bighorn Realty
Previews® Property Specialist