Offering to buy, when it is under contingent contract

turtleshopeApril 14, 2012

Hi all,

This hasn't happened yet, but I have wondered if there is any etiquette in this situation. We are looking to buy. Some houses are under contingent offers. We don't need to sell and are pre-approved by a bank. Inventory is tight in the small area we are looking at.

How can I approach a seller about making an offer on a property that is under a contract contingent on the sale of the other buyer's house?

One seller did not respond to my agent's inquiry about their contingent property. Another seller has offered to let me see the house in case her contract fell through.

Has any of you done this before? What I gather from the forum is that agents discourage this practice. It seems a little rude to come in and break a contract ... on the other hand it is in the seller's interest to seek better offers. So I wondered if there is some etiquette to it.

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We were once on the other side of your situation: the ones with a contract that the seller then tried to break.

We had agreed on price & had the contract with no contingencies & were set to close in 30 days. Things were going great - we even sold our then house before it hit the market, so we were ready for it to finish up smoothly so we could move out of our house & into this one. Our buyers wanted our old house by Christmas, so we were right on target.

In the inspection period there were a few minor fixes they agreed to - grudgingly - then suddenly, they wanted out. Our realtor suspected another offer was on the table, even though they said their plans had changed & they were going to keep the house. We already knew they had moved to another town for his job, house was empty, etc. So it just didn't make sense.

Long story short, our agent told their agent we would probably sue since we'd have to go into a rental or back out of our contract with our buyers - either way a great inconvenience & expense to us. After a consultation with their attorney, they decided to honor the contract.

So, in my experience, I'd say you will get no response from a seller with a contract on their property.

    Bookmark   April 14, 2012 at 12:31PM
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Maybe it's a regional thing, but in my area you could put in a back-up contract. That is, assuming you want it to be a back-up contract and don't want to try to get in line ahead of the existing contract, which would be frowned-upon. In a back-up contract, if the existing contract fails, that triggers your contract. It would have you tied up during the period of time the house is wandering toward closing, but you could also put a time limit on yours.

With as much second-guessing and stopping-and-starting as is going on in real estate deals now, your contract could come into play. Particularly if the original contract agreed on a closing by "X" date and there was a problem and that date couldn't be met.

    Bookmark   April 14, 2012 at 12:41PM
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Years ago we put an offer in on a lot, contingent on selling our house. A couple of months later the seller received another offer on the lot. We were given notice to either remove the condition and go ahead and buy the lot or let it go. At that time we werent in a financial position to be able to buy the lot without selling our house, so we let it go. I think same rules apply still.

    Bookmark   April 14, 2012 at 12:44PM
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If there is a contingent contract on the house it is not "rude" to make a non-contingent offer. It's business. Hopefully the seller took the contingent offer with a "kick out" clause, meaning that they can force the original buyer to remove all contingencies and go forward with the deal or drop out so that they can take the new non contingent offer. The original buyer usually has a limited time period 24-72 hours to make the decision.

    Bookmark   April 14, 2012 at 1:28PM
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I don't know about the legalities, or the 'official' ettiquette on this, but when we were selling, we had to consider the possibility of it happening. After we had a verbal offer, which we'd accepted (just waiting for the contract to wend it's way to us), we had 2-3 other parties ask to see the house. So DH and I did sit down and discuss the situation from our point of view.

We decided that: if anyone wanted to come through, we'd be happy to let them, as long as they knew the house was almost under contract. We also agreed that that was ONLY in case our sale fell through--we decided we would not entertain any other offers, even they were higher, because we'd already given our word to our buyers.

So, when asked for showings, we told the booking desk that the house was almost under contract, that the 'lookers' were more than welcome to come by, if they wanted. One fellow DID come out, the others decided not to.

My personal ethics mandate that I not go back on my word. So I would never have let down someone who had bargained with me in good faith, after an agreement had been reached. Not even for (a lot) more money. If someone HAD made a higher offer, after they'd been clearly told we'd already agreed to sell to someone else, trying to steal the sale out from under them? They wouldn't have had a prayer of buying my house, not even if the first sale fell through. I'd feel that was a really obnoxious thing to do, and I wouldn't have inflicted those kinds of people on my neighbors.

Sorry--I don't know your situation, I'm certainly not commenting on you personally--just telling you what my impressions were when we WERE in that situation.

    Bookmark   April 14, 2012 at 7:26PM
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Anyone who has taken a contingency contract in this market without a kickout clause is an idiot. You have to assume that if they have realtor representation, at least the realtor has prevented them from being an idiot about that and sitting and waiting for a year with no showings. So, the home is still technically for sale, even though the buyer will certainly buy it if their home ever sells. There is nothing wrong at all with making an offer on a home for sale. Your realtor should have no problem presenting any seller with a contract.

Go and look at any home listed for sale, contingencies included. If you want to buy it, offer to buy it. You are not violating any etiquette to do so. No realtor in his right mind turns away an actual sale. Bird in the hand vs. the gazillion in the bush scenario. However, "pre-approved for financing" can mean a host of things. Be as sure as you can that you won't be the one scooped out from underneath if something weird happens with your financing---as has been happening more and more of late.

    Bookmark   April 14, 2012 at 8:46PM
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Where I live, the house with a contingent offer is still technically on the market, as the owner can still entertain other offers providing they give the original buyer 24-72 hours (depending what's in the contract) to remove the contingency. This is only fair to the seller as it can take the buyer several months to sell his/her home and the seller could miss out on other opportunities during this period.

    Bookmark   April 14, 2012 at 10:54PM
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There seems to be confusion on what a contingent contract is. When a seller takes a contingent offer on their home, they, they then would love to entertain others. You, as a new buyer, are expected to write offers on these properties, and the seller is expecting to receive them.
A lot of responses here have no ties to being involved with a contingent contract.

    Bookmark   April 15, 2012 at 8:32AM
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OP. First right of refusal contracts, where a buyer has a house to sell before they can close on another, is very common.
Make an offer and see what happens. Either the buyer can remove the contingecy or not and if not you might end up in first position.

    Bookmark   April 15, 2012 at 1:06PM
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So, in my experience, I'd say you will get no response from a seller with a contract on their property.

caulk_king, If the contract is contingent on the buyer selling and closing on their home, I think that the seller would be very happy to show the home to a qualified buyer with no contingencies.
And azzalea, when a buyer enters into a contract contingent upon selling their home they should know that the seller has every right to accept a non-contingent offer (providing that a "kick-out" clause was included). Would you have the seller wait 6 months or a year for the buyer to get their house sold? And verbal negotiations and agreements are no substitute for a written and signed contract.

    Bookmark   April 15, 2012 at 7:34PM
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Any seller or seller's agent would be delighted to get a non-contingent contract offer.

    Bookmark   April 15, 2012 at 8:06PM
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We were the buyers in this situation:

Found a house on craigslist that had an accepted offer that was contingent on the buyers selling their house. We made an offer with no contingencies. The earlier buyers had 48 hours to remove their contingency and continue with the deal. They couldn't do that so our offer was accepted.

It's a business deal. That's how it goes.

    Bookmark   April 16, 2012 at 4:10PM
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"It would have you tied up during the period of time the house is wandering toward closing"

If the contract has not been accepted it can be withdrawn at any time, and you can also simply put in a clause that allows the offer to be withdrawn before it becomes first.

    Bookmark   April 16, 2012 at 5:14PM
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So if a house has a sale pending sign, does that mean it has a contingent offer, or is the realtor the only one who knows? Or is the sale sign just still up?

    Bookmark   April 27, 2012 at 1:47AM
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You never know. Pending could be a solid contract with no contingencies, or a contingent contract. In my area most agents don't put up pending signs, in fact the company that I work for strongly discourages their use. Until a home actually closes, it's usually best to leave the For Sale sign up. You never know what is going to happen, and it doesn't look good for the pending sign to go up and then come down again.

    Bookmark   April 27, 2012 at 12:19PM
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If you think the house might work for you, call your own Realtor or the listing Realtor to check on the status.

If the listing Realtor says that there's a contract on the property, ask if there are contingencies & if so what they are.

    Bookmark   April 27, 2012 at 4:13PM
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What about 'Active with Contract.' I was told you could submit an offer as a back-up. House in question is a short-sale. Seller accepted the first offer which is a financed offer. We want the house and would offer cash.

Is it different with a short-sale? As a back-up offer on a short sale, would we be prevented from buying another house during the wait period with the bank negotiations?

How does one find out if the accepted offer has contingencies?

    Bookmark   April 28, 2012 at 12:43AM
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Well we tried and the seller did not want to entertain our offer (we would match the price but have no contingency, not even the mortgage contingency). That would not have been my decision, had I been the seller!

    Bookmark   April 28, 2012 at 10:02AM
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It seems very strange for a seller to turn down a firm buyer with no contingency and stick with a contingent offer.

    Bookmark   April 28, 2012 at 5:30PM
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That doesn't sound right.


    Bookmark   April 28, 2012 at 7:10PM
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The seller probably knows details to which you are not privy.

With any house under contract it is good to check with the listing agent to see if one can make another offer. The listing agent knows details that are not public, which may make the seller consider a better offer. Most times it is a secure contract, but you don't know unless you check.

    Bookmark   April 28, 2012 at 8:05PM
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CMarlin, What kind of details might there be?
It was FSBO. My agent thought that had there been a seller's agent, the deal would have gone to the next step (the other buyers would have a chance to remove their contingency).

For the others who were wondering how to know if there is a pending or contingent offer on the house, at least in our area, it is on the MLS. Redfin at least displays either "contingent" or "pending," as do the MLS data. Maybe this is not teh case outside the Midwest?

    Bookmark   April 28, 2012 at 11:39PM
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Because the home is FSBO, I'm guessing that the contingent offer doesn't involve a buyer's agent. Since your offer was identical and you have an agent, the seller didn't want to pay your agent's fee, essentially making your offer lower than the contingent one.

    Bookmark   April 29, 2012 at 11:24AM
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Actually, the contingent offer's agent negotiated dual agency. My agent was not interested in that, and so the seller would have got more in a deal with us, as our agent's fee was lower.

    Bookmark   April 29, 2012 at 9:13PM
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