For those who follow our weekly blog, you’re well educated that our Phoenix/Scottsdale residential real estate market has been and is still sustaining a healthy balance. For example, the most recent S&P Case / Shiller Home Price Index shows Phoenix running a 4.95% annual rate of appreciation – a number that’s positive for both buyers and sellers. Also, as we’ve reported, foreclosures in Phoenix are running at historic “lows,” whereas just a few years ago we along with Florida and Nevada were leading the nation in the highest foreclosure rates.
Our steady and solid market has now brought back into play what’s commonly known as the “Contingency Sale.” The contingency sale simply allows a buyer to buy a home with a “contingency” to close escrow on their existing home first so that their proceeds of sale can then be used to close escrow (down payment and closing costs, or cash) on their new home. This enables the buyer to get the best price they can on their existing home the without risk of losing a deposit.
You might think that that’s the way it should be, however, for the better part of the last decade, that’s not been the case. When we were in the throes of a rabid seller’s market, sellers did not need to give a contingency as there were plenty of buyers with cash or good financing without the need to sell their home who lined up to buy the home. It’s only been recently as our market has steadied that sellers figured out that this could be a smart tool to get their home sold and move into their next one without having to move twice. And it can be a smart tool as long as some precautions are taken to vet the buyer and what he’s selling.
Next week we will look at some contingency sale safeguards that a seller can take
to protect their interest and not get stuck.