By Shirley J. Hagler
Vital Components in the Contingency Purchase -- If you're like a lot of Americans, you've got to sell your current home before you consummate the purchase of the new one. But how important is it to "convince and keep convincing" the seller that you're the best buyer for him? And what if your home doesn't sell within the prescribed timeframe, would the contract be void? And if so, what level of cajoling would be required to renegotiate with the seller at that point?
Yes, the contingency purchase is fraught with questions. That's why the buyer must be aware of two vital components --- the importance of timely contract negotiations as well as the "woo factor." The former means that the buyer must be aware of contract expiration dates and renegotiate with the seller prior to time running out. Less concrete, but just as vital, the "woo factor" means that to the degree the buyer inconveniences the seller in a contingency sale, a corresponding amount of placating and possible concessions will be required from the buyer. Much like the role wooing serves in the process of courtship and marriage, applying the "woo factor" in a contingency purchase should create a higher success rate in the relationship between buyer and seller and help soften the rough edges should things not go as planned.
Let's use the following scenario as an example.
You made an offer several months ago. The offer was not only contingent upon selling your current home, but was also contingent upon receiving a certain amount of equity to do so. (This, by the way, is advisable, especially if you're concerned that the net proceeds you'll receive from the sale might be on the short side. It helps protect you should the sale encounter unexpected expenses in the form of work repairs, closing costs, making you short on funds available to close the second purchase.)
It's now three months later. The closing date specified on the purchase agreement for your new house has come and gone; and you're a bit leery about communicating the bad news to the seller---that your house STILL hasn't sold. Here's the first $64,000 question: Is it necessary to extend for you to sign another purchase agreement with the seller? The winning answer is "yes, it is," because when you were unable to perform on the contract, remove the contingency, and close on the sale on or before the date specified, the contract became void. The seller doesn't have to sell to you, you don't have to buy the house. In essence, all bets are off!
Here's the second important question: When should the contract-savvy buyer approach the seller? Obviously, before the specified closing date occurs. The good news is that prior to the contract's expiration, all you'd have to do is amend (in writing and with both party's approval) the closing date on the purchase agreement. No new contract to re-write; no other negotiations required.
Here's why. Once the existing contract of sale is void, you will need to negotiate an entirely new agreement with the seller. That means that the sales price could change, and, in a heated seller's market, the terms could become more restrictive for the buyer. In fact, the seller might decide not to sell the house to you at all! (Now THERE'S a motivating factor to keep the lines of communication open and your contract knowledge razor sharp!)
But don't forget the "woo factor." Your focus should be on creating a win/win situation---one with full disclosure to the seller about your situation, in a friendly, confident manor that reinforces the seller's decision to stick with you as his buyer.
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