If you indeed are in a seller's market, why take a contingency? Your house will be off the market , and if they don' sell, you're stuck...I'd suggest to the potential buyers to place their home on market asap, to get a feel for interest...Or take the contingency with a kickout deadline, say 1 month...

We purchased a home under very similar circumstances. We offered the sellers a 5k non-refundable earnest money agreement. We were in a sellers market and knew we could sell our home immediately (we had an offer and a back-up within half an hour of listing). The other choice, I think, is to make it a 72 hours kick-out contingency. If you receive another offer, you give the buyers 72 hours to come up with the money or you kick the contract to the next buyer.

More important than a 30 day time limit is a "kick out" clause. This states that if you get non-contingent offer you will give the first buyers the opportunity to remove all contingencies or you have the right to dissolve the first contract and accept the new non-contingent offer. There is usually a 24 - 72 hour time limit for the first buyers to make their decision.

However, there are many buyers who will not bother to even look at a home that has a pending offer on it, even if it is a contingent offer with a kick out clause. So you may be limiting your future showings.

terriks said:
However, there are many buyers who will not bother to even look at a home that has a pending offer on it, even if it is a contingent offer with a kick out clause. So you may be limiting your future showings.

and that is what i believe also, my 1 month contingency is in 1 month they proceed to purchase regardless of their home's status or lose the contract..

Thanks very much for the replies. I guess whether we accept or not will depend largely on what our agent thinks of their town home (whether it's priced right, etc.) and their financial picture.

Is earnest money in these cases common? It sounds like a good idea to me

We just closed on 2 homes Tuesday. I'll summarize what happened with us.

After looking for 7 months we found new construction in August. We bought a house that was already spec'd out, permits pulled, house had not gone up yet. February comes, house supposedly has 1 month to go. Get offers, couldn't work one, 2nd we were working when a 3rd came in. Accepted #3 due to type of loan, they pulled out during attorney review. Buyer 2 came back, wanted a 3 month close we said no. We wanted a 30 day close but met in the middle with 60.

Attorney review, then inspection. They had 5 days to give us their fix list and didn't. Day 6 our agent calls to get the list. We fixed one safety related item (flue on new furnace) & was going to try to work on 3 things by getting estimates. If they were in a certain dollar amount we'd attempt to fix or credit. Buyer got married went on honeymoon, no contact for 2 weeks. After a misunderstanding by my agent (he thought we were fixing 3 things) we were then committed to doing something.

At this point, we were called to closing on the new house and if we did not close would be charged almost $200 per day. A week before closing (which is now week 7) the buyers started making phone calls to contractors & township about permits. By a few days before closing at a few hours after business close at the start of a national holiday we get a call that they'd changed their mind about what was verbally agreed on. At this point we were being charged per day, had utilities scheduled to go off, daughter was signed out of school and we had most of our life packed. Tuesday morning the buyer walked through we were still being moved out.

When hubby left for closing (I was still with movers) we still didn't know if we'd have issues or not. Since the title company already wrote up what they'd agreed to, it could not be changed without changing the close date. Thankfully they said ok.

It's a domino effect. If either your buyer has issues selling their house or you have issues with the house you are buying one may not close when it is supposed to. Thankfully our buyer did not have a house to sell, but that could have worked against us as well.

The amount of earnest money we had ($1,000) wouldn't have helped us much at that (closing day) point because we were on day 4 of not closing on our new house. It was also so small they could easily walk away while we'd lose our $15,000 deposit on the new place. Our new house would have gone on the market, and from what I understand, we'd get charged and price decreases so we had a lot to lose.

As for being a buyer looking at a house with a contingency, I liked one house that was under contract (of course) but it didn't fall through. Since the type of house I wanted was very specific, I would have looked at one if I liked what I saw, if there was nothing special about the house, no. Why fall in love with a house you probably can't have?

The other thing about earnest money, if you have anything more then a 30 day close and something happens, it's possible your selling season is over, which is what we would have probably been looking at had we not closed. Last year our market was from February until a few weeks after Memorial weekend.

The young local couple who looked at our home yesterday (they are our 3rd 'lookers' if you count the 'crazy' no-shoes lady) are interested but didn't want to make a formal written offer until they knew we would consider a contingency that their town home sells first. They are listing it this weekend and I don't expect that it would take more than a month for them to get it sold.

I told my agent that yes, we'd consider it as long as the offer was a good one. I don't see why not? It was a brief conversation with our agent, so I don't yet know all the ins and outs of such a contingency. But he did say that we could put a 30 day limit on it and make sure that they had mortgage pre-approval. He also said he'd take a look at their town home to evaluate it's sell-ability (but he didn't anticipate a problem with that since so many people are in need of housing here).

If it was me, I would ask they list their house 1st and come back in a week or 2 after seeing how much action they get once listed. In most areas, condos and town homes are not selling. There was a post on citydata by one person who was listed about a year. If you go to the real estate section there, you can find lots of posts from others not able to sell.

Ask your agent how desirable town homes are in their area.

Good luck & congrats on receiving an offer.

Sorry for the book.

Is earnest money in these cases common?

Earnest money should ALWAYS be part of a RE contract.

I'll second that having an offer on your house may really deter other potential buyers.
We bought a builder's model home last month. When we were in the sales office the first day, the agent told us the house was "Under Contract with a 48hr kick-out clause". We almost didn't go see the house at all. Why fall in love with a house that was already sold? The agent was quick to tell us that the buyers had 2 houses to sell, which made us reconsider just enough to take a look. Good for the builder since we could put in an offer w/ no contingency.
We're selling our current house and have had several lookers who have yet to even put their houses on the market. I think they're awfully optimistic!

That's a nightmare of a story Roselvr!

"Is earnest money in these cases common?

Earnest money should ALWAYS be part of a RE contract."

Without earnest money the contract is arguably invalid.

I accepted a contract with a buyer who had to sell their house first. We had the clause that said if we had another contract they had 72 hours to remove the contingency & proceed with the sale. Also, our agent continued to market the house. We had about the same number of showings per week that we had before there was a contract on it. The difference was, since our agent told everyone about the contingency, we only had cash buyers - no one with a house to sell.

We ended up at the end of the second week getting a higher offer from someone with cash. Since they knew we already had a contract, they knew they had to give us a good offer or we might wait for the first buyer. I think that helped to make negotiations with the second person easier, and get us a better price.

The same thing happened to us when we were trying to buy a house. We had the contract contingent on selling our home. The sellers got a cash buyer a few weeks later who offered them significantly more money than we did. We passed on it then, because we didn't want two mortgages. That meant the seller got a better price too.

"Is earnest money in these cases common?

And the more earnest money, the better!! If you are a seller, you want the buyer to have money on the line to make them think twice about walking. If you are a buyer, and you are serious about buying a house, you should be willing to put up earnest money to indicate your good intentions. Plus, as the buyer, you are going to have to cough up the money anyway at closing.

Well I guess this has ended up being a moot point for us. The potential buyers didn't show up for a 2nd viewing on Sat. and we've heard nothing from their agent.

I've learned a lot though, so I don't regret asking the questions :o)