12 ITEMS TO BE AWARE OF WHEN YOU'RE A CONTINGENT BUYER
WARNING: this is an “information heavy” post. You can either be an informed buyer or seller, or one with your head in the ground – so buckle up buttercup and let’s do this!
By Heather + Steve Ostrom
Meet with a listing agent that has a successful track record of contingent closings. Interview them in person and see their work online.
- In an ideal world, you want that listing agent being your buyer’s agent so that there’s “less information chefs in the kitchen.” This isn’t always reasonable or wise, if both sales are not in the same area. Always err to an agent that has expertise in that city.
- COP – Understand the forms involved – you will see or might see. Don’t just take the lip service of the listing agent’s success dealing with and negotiating a contingent sale or purchase. Have them walk you through the California= Association of REALTOR’s form – Contingency of Purchase (COP) – line-by-line.
- Forms: Also the Seller’s purchase of replacement property form (SPRP) Not everyone will use the SPRP and we have limited use with it as well – but something you should be aware of … it can be a limiting item towards finding buyers willing to take that risk on your first home.
- Contingency removal form (CR – shown below) and how those dates will be potentially modified by the COP form (link above)
Have your trusted listing agent contact an Escrow and Title company (of your choice) to create an “estimated seller net sheet” drawn up on a realistic sales price, at a few different price points perhaps – as you never know what changes will occur in the market. This will be needed for the next step.
- There are numerous title and escrow companies to choose from – in our area, title and escrow are usually housed in the same place. A great title and escrow officer can be the difference between a stressful and smooth transaction based on their experience, and knowing when to spot trouble on a file, and also ensure the lender gets their fees quickly.
When you need to sell your current home, in order to buy your next home – this is referred to as a “contingent sale.” Your purchase of your next property is “contingent” on the sale of your current home. As we are primarily listing agents working in Roseville and Rocklin, California and the greater Placer County region – we often receive offer packages that could stand for some improved presentation.
Speak to a lender and ensure the lender gives you buyer fees estimate and is upfront about your financial scenarios. Ensure your lender is connected with your listing agent and connect the estimated net sheet with them.
- If you feel guarded or concerned with the lack of numbers being shared by your chosen lender – consider this a warning and red flag.
- Interview with a few lenders – no listing nor buyer’s agent should boss you around on your lender, but you should also ask if they have trusted lenders that they know create positive outcomes for their clients. Most agents just want you to have a positive experience. We can’t tell you how many lenders have waited to the last minute to shock our clients – and then everyone loses and then potentially puts all files at risk for cancellation.
- Have your lender explain what TRID is and how the dates involved with TRID cannot be modified.
- Need a lender? Here are a few of our favorite local lenders to check out
Unless reason for concern, or past bad experiences, try to keep all escrows with the final listing purchase’s escrow company. Reason, if each day matters that you’re not in the next home – having at the same escrow company can be the difference between a same day closing versus a Friday closing on the first home, and Monday on the next, with money being wired to next escrow company. Yet numerous buyer’s agents continue to push for their escrow companies. The last house in the domino chain of closings risks the most – if your buyer’s agent has a legitimate concern for the escrow company, we get that – it’s happened to us too. As long as everyone understands and is disclosed the “why” … do what you need to do. Contingent sales are a group effort.
When offering on your “dream home” ensure the listing agent has access to updates without having to badger– from all lenders, listing agents, buyers agents, and title companies. All parties should be understanding of the elevated stress levels of the party at the end of the closings. This also includes updates about contingencieson all properties involved and dates involved. Contingencies: loan, appraisal, HOA docs (if applicable), preliminary report, seller disclosures, sale of buyer’s property (4B), buyer investigations, buyer’s physical inspection, review of liened items or leased – be mindful if a solar lease is involved.
Ensure you have contingency removal dates and closing dates for all properties involved– clearly marked on a calendar. It will be information overload that has the risk to have you twiddling your lips, but stay strong – this is a small window of stress for a lifetime of happiness to get your dream home. Education and information are your friends.
Understanding the upfront fees – the appraisal fee will be an upfront fee. The inspections (depends on the area) are often steered by the buyer side with a few exceptions in Northern California for country properties where you sometimes see septic and water tests on the seller. A delay on coordinating any inspections once you’re in escrow (while being mindful of when your inspection period starts and your contingency of purchase form are critical here). If you do not need to start inspections because of the way the COP form (see above) is marked – be mindful of this …
- Do not wait to order your appraisal or hold off inspections – your delay as a buyer can be self-sabotage and risk a seller issuing a “notice to perform” if you do not hold to your contractual obligation. There will only be so much your lender or agent can do to protect you, if an appraisal review runs late or there isn’t anyone to have race out to an inspection same day past your contingency period.
- Example, you have a home inspection on day 4 of a 17 day inspection period – you wait until day 15 to order a roof inspection or HVAC inspection because your home inspector suggested further evaluation – and then you need to race to ask for an extension. You can’t assume that you’ll be granted this modification to contract.
- Warning: Contractors and inspectors can be booked out for a week or two, particularly for specialty items, or any testing involved. Some may be free for a bid, but some may be a fee (and a fee that is worth the cost for your review – there may not be any recourse after close of sale).
- Fluid communication and updates between all parties (buyer + seller) can often solve a lot of these concerns if the time extension is genuinely needed, but it cannot be assumed it will be granted – particularly in a hotter market.
- If you have a credit coming – be sure to loop in the lender that it might be coming (example a credit as part of negotiations from a buyer request for repairs).
ALWAYS have a housing solution, plan B. Your homes may not close on time and one deal may fall out and go back into escrow and affect a perfect closing.
- Sometimes you have such a cherry “all-cash” deal closing on your primary home, that you have to just make it happen and find a rental solution.
- If things fall apart, never force a home sale – it’s too big of a purchase and sometimes things don’t work out and it does stink. Sometimes renting is the temporary and right solution.
Seller Occupancy After Closing – Negotiate this Upfront when you’re a seller. Delays can happen on files. It happens, even on the most perfect of files monitored. There are numerous bodies behind the scenes on loan and this can affect your closing. Along with TRID – be aware of this as a buyer. TRID can delay you alone (see #3 above, last bullet).
- Most lenders will not allow over 60 days of occupancy by seller after closing, and most buyers aren’t the biggest fans of much of anything past 30 days (if any at all)
It stinks if the seller knows you have to buy their home and they take advantage of this fact, when it comes to negotiating repairs or a credit after your inspections. All the more important to also have a plan B for housing if you need to walk away and it’s becoming too much. BUT having stated that, sometimes we need to see big picture, is it truly a crisis or an easy hundred dollar fix that isn’t worth walking away from your dream home. Break down all the costs and get bids to make an educated decision that’s right AND wise for you. Education and information is King/Queen.
Sometimes it’s best to take the credit and sometimes it’s important to wait to see request for repairs executed before close of escrow (COE). It depends on the scenario what’s the right route.
- If it’s pest work, sometimes it’s important to have the house opened up for review, to ensure there’s no other underlying issues or damage that can’t be revealed by a general inspection.
- If you have work being done, as part of your request for repairs – ensure there’s mention of all work being done BEFORE close of escrow.
- Sometimes it’s best for buyer to take the money credit – to take control of overseeing repairs by their own trusted contractor that way they know who the work is being done by, and may be able to save cost.
- Ensure that a licensed contractor is doing all work and receipts are provided before COE (close of escrow)
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All this coordination and effort – is worth it. These transactions can be a bit stressful, all the more reason you should work with us – we’re educated, experienced, happy, and we get it done. Plus we’ll do all the stuff behind the scenes to keep it less stressful for you. (Note: most of our wrinkles are either from our three kids or contingent sales).