A Contingent Offer is an offer made by a buyer on a property “contingent upon” the sale of another property owned by the buyer. The Aspen market has far fewer contingent offers than most markets due in large part to the high value of real estate, the solvency of Aspen buyers and the high demand for properties. A contingent offer is much less desirable to a seller as the buyer is asking the seller to wait for the closing on their existing property. During the waiting period the seller’s broker is required to market the seller’s property as “under contract” which discourages other buyers from looking at the property.
If a buyer is in a position that requires a “contingent” offer, the other terms of the offer will need to be stronger to encourage the seller to cooperate. Terms that may be favorable to the seller include a strong offer price, cash rather than mortgage financing, no inspection – or purchased “as-is”, and offering the seller flexibility in giving possession.
This summer I negotiated two contingent offers, both were accepted. Both buyers offered very appealing prices to the sellers, one offered full price as we were in competition with another offer.
In a contingent sale there is usually a Conditional Sale Deadline. This is the date by which the contingent sale must close. The Conditional Sale Deadline is a date pre-written in the Colorado Real Estate Contract form. Both a buyer and seller are better served by utilizing an “under contract deadline” for the contingent sale rather than a closing deadline. The number of days between an accepted contract (under contract) and closing is often 45-60 days. There is no reason a seller should wait the additional 45-60 days if the buyer does not have the property under contract.
To date, one of the contingent contracts is still in process. We’re hoping the buyers $10,000,000 home in another state goes under contract and sells within the contingency period (aka Conditional Sale Deadline). In this transaction we were able to negotiate 240 days. A record LONG contingency for my 25 years in the business. But this situation works well for both the buyer and the seller. The other contingent contract fell out as the buyer was not able to get his contingent property under contract. His property is still on the market on the east coast. The property he had under contract is still available – and we’re headed into “off season” so it may still be available when his existing property sells. Once his existing property is under contract he will have much greater negotiating power and likely be able to negotiate a lower price.
Another method utilized in the real estate industry for contingent offers is the First Right of Refusal. This gives the seller the ability to consider other offers and if one is submitted by another buyer, the seller can give the buyer with the contingent contract notice and force the buyer to remove the contingency or cancel the contract. This has resulted in the first buyer on contract becoming more motivated to secure financing often in the form of a bridge loan.
There are several avenues for obtaining a bridge loan locally. Mortgage brokers are not usually a good source. Local banks are often more creative in bridge financing.
For more information on buying or selling real estate in the Aspen Area, give me a call today.
Kim McKinley
(970) 379-4559