When selling a home in Eden Prairie, it can be a complex process that requires careful consideration of offers, particularly when dealing with contingencies. In a case where a potential buyer presents a contingent offer based on the sale of their existing property, there are several important factors to weigh. This scenario can be both an opportunity and a risk for a homeowner, especially if the buyer’s home isn’t even listed yet. As a seller, it’s essential to protect your interests while remaining open to opportunities that might ultimately lead to a successful transaction.
Understanding Contingent Offers
A contingent offer means that the buyer’s ability to purchase your home depends on selling their current home. While this may initially seem like an additional layer of complication, it’s a common scenario, particularly in markets like Eden Prairie, where many buyers may need the proceeds from their current home to finance a new purchase.
In the case presented, the potential buyers are a well-qualified young couple who are excited about your home, including the over-upgrades you made. They’re not looking for a fixer-upper and prefer a move-in-ready property, which makes your home an ideal match. However, their offer is contingent on selling their townhouse, which has not yet been listed on the market.
The Benefits of Accepting a Contingent Offer
In some situations, accepting a contingent offer can be advantageous, especially if you’re in no rush to move. Since your home has been on the market for 75 days with only a couple of lowball offers, this contingent offer represents a potentially serious buyer who appreciates the quality and upgrades you’ve invested in.
If you’re patient and willing to give the buyers time to sell their townhouse, it might lead to a successful transaction that both parties are happy with. However, it’s essential to set clear boundaries and protect yourself from potential issues that may arise if their home doesn’t sell quickly or at all.
Setting Protective Terms in a Counteroffer
While it might be tempting to accept the contingent offer as-is, it’s crucial to include terms in a counteroffer that protect your interests as a seller. Here are several key elements you should consider when crafting a counteroffer:
- Kick-Out Clause (Escape Clause): A kick-out clause allows you to continue marketing your home and accepting offers from other buyers even after you’ve accepted a contingent offer. If another buyer presents a non-contingent offer, you can give the first buyer a set amount of time – typically 24 to 72 hours – to remove the contingency or back out of the deal. This way, you don’t lose out on potential buyers while waiting for the first buyer’s home to sell. The kick-out clause provides a safety net, ensuring that you’re not locked into a single offer indefinitely.
- Timeline for Listing the Buyer’s Home: In your counteroffer, include a firm deadline by which the buyers must list their townhouse. A reasonable time frame might be one to two weeks after accepting the offer. This ensures that they’re actively working toward selling their home and not delaying the process. Additionally, you can request proof that their home has been listed, such as a copy of the MLS (Multiple Listing Service) entry, to verify their progress.
- Deadline for Securing an Offer on Their Home: Beyond just listing their home, it’s also important to set a deadline for when their townhouse must be under contract. Without a clear timeline, their home could sit on the market for an extended period, leaving your home tied up in the process. Consider giving them 30 to 60 days to secure an offer on their home. If they fail to meet this deadline, you should have the option to cancel the contract or negotiate further.
- Non-Refundable Earnest Money: To ensure the buyers are serious about purchasing your home, you might ask for a non-refundable earnest money deposit. This deposit shows their commitment and provides some compensation to you for taking your home off the market for a period of time. If the buyers fail to sell their home or back out of the deal for any reason not covered in the contract, you keep the earnest money. This can serve as a deterrent for buyers who aren’t fully committed.
- Inspection and Financing Contingencies: Even though the offer is contingent on the sale of the buyer’s home, it’s important to keep the standard contingencies in place for inspections and financing. Make sure that the buyers complete the home inspection within the first week or two of the contract being signed. This prevents the possibility of buyers backing out of the deal months later due to undiscovered issues that should have been addressed early on.
- Rent-Back Option: If the buyers sell their home but the closing date on your home is months away, consider offering a rent-back option. This allows the buyers to rent your home for a short period while they finalize the sale and move into your home. This can be especially helpful if the buyers need to move out of their home quickly but the timing doesn’t align perfectly with the closing on your property.
Potential Risks of Accepting a Contingent Offer
While contingent offers can be beneficial in certain circumstances, they do come with risks. The primary risk is that the buyers’ home may not sell, leaving you in a position where the deal falls apart after weeks or months of waiting. In this case, you would have lost valuable time on the market, and the real estate market conditions may have shifted during that period, potentially making it harder to find another buyer.
Additionally, homes that are listed as “contingent” often receive less attention from other buyers. Many potential buyers may be reluctant to pursue a home that’s already under contract, even with a contingency. This could reduce your chances of receiving a backup offer or a better offer from a more qualified buyer.
Consulting with Your Realtor
Throughout this process, it’s essential to consult with your Eden Prairie real estate agent. Your agent can provide valuable insight into the local Eden Prairie market, assess the likelihood of the buyers’ home selling quickly, and help you navigate the legal and contractual elements of accepting a contingent offer. Your agent can also help you determine whether this contingent offer is your best option or if it’s better to wait for a non-contingent offer to come through.
Realtors are well-versed in structuring counteroffers that protect their clients, so lean on their expertise to ensure that your interests are safeguarded while keeping the deal attractive to the buyers.
David’s Final Thoughts…
Selling a home in Eden Prairie, MN and navigating contingent offers can be tricky, but with the right terms and protections in place, it can lead to a successful sale. If you’re not in a rush to move and the buyers seem serious, accepting a contingent offer could be a good option. Just make sure to include a kick-out clause, clear deadlines, and non-refundable earnest money in your counteroffer to minimize risks. Working closely with your real estate agent will help you make an informed decision and ensure a smooth and successful transaction.
David Gooden is the co-founder of the Dane Arthur Agency & a local Realtor specializing in Eden Prairie luxury homes.