Contingent sales are always difficult. If you elect to take your property off the market and prices in your area are declining, you run the risk of your house being worth even less than it is currently.
If you agree to a contingent sale, the first step is to set up the contract where you can cancel within a specified amount of time. Typically the buyers have 60 to 90 days to place their property under contract and to close on both their current property and your property. Alternatively, you could give the buyers a specific number of days to remove the contingency regarding the sale of their home.
Here’s where it gets tricky. If the buyers have not sold their house and they remove their sale contingency, will they still be able to close on your property? To protect yourself, ask the buyers to demonstrate that they have their down payment from a source other than their present property. They must also be able to qualify for payments on two houses. Ask for a “preapproval” letter from the lender, not just a “prequalification.” Given today’s current lending environment, it’s extremely difficult to qualify for payments on two houses.
This situation becomes even more complex if you receive a backup offer. You could be at risk to sell your house twice. For example, assume that you accepted the original offer contingent upon the first buyers selling their house. The buyers have not yet sold their home when you receive a second offer without a contingency. You decide to cancel the first offer and take the second offer. The challenge is that unless the cancellation is handled properly, you could still be obligated to sell to the first buyers, even though you have a binding contract with the second buyers. Needless to say, this is the type of situation that could easily end up in court.
Be cautious. Protect yourself by hiring an agent who understands what is required to handle backup offers. If your agent seems unsure, consult with his or her office manager and/or broker. Alternatively you can check with an attorney. In many cases, the local or state board of Realtors has special forms for handling contingent sales. Since contingent sales are so complex, please carefully weigh whether it’s better to agree to the contingent sale or wait for a buyer who doesn’t need a contingent sale.