Our recent deal with Dean and Pam (not their real names) wasn’t going to be a slam dunk, but it was very do-able. They wanted to use the funds from the sale of their current home to purchase their next one, but they also did not want to have to move twice, as in selling their home and then renting while they looked for their next one. They therefore decided to do a “contingency sale.”
Contingency sales are deals that allow a buyer to make an offer on a home that is only binding if they are first able to sell their current home. This way buyers can have the comfort of having their next home locked while they try to sell their current house. Since home sales in the Valley have strengthened and our market is well “balanced,” we’re seeing these sales occur more and more.
We set them up on an automated MLS home search and began to look at some homes for sale. Dean and Pam were very agreeable to several different homes in various locations, but ultimately fell in love with great town-home that popped up on their radar. One problem though; their house was not on the market yet. They wanted to make an offer right away contingent on selling their home first.
The catch with a contingency is that sellers would often prefer not to deal with them, and for good reason. If a seller agrees to a contingency, they then must take their property off the market while the buyer’s try to get their home sold. Luckily for my clients, the town-home they wanted was already on the market for 10 months so the seller was ready to take some chances to get it sold. Fortunately, Dean and Pam had some other plusses going for them as well.
For one thing, we had gotten them pre-approved. Our lender said they were very strong borrowers. Secondly, they had a wonderful golf course home in Tatum Ranch, which was in impeccable condition and would show great. We felt it would be a relatively easy sale.
Ultimately we were not only able to convince the seller to take our contingency, but we also negotiated a lower price as well! We ended up selling their home in 30 days (not a bad time frame if I do say so myself) to a well-qualified buyer and set up the closings to sync with each other perfectly.
A few days before the closing date we completed our final walk-through and everything looked great. Well their old home and their new home both closed on time and they were all set to move… then it happened!
A few hours after closing, Pam walked up to the door of their new home, key in hand. She realized something was very wrong – and very wet. Her new home was flooded! The newly repaired water purification system had popped a filter allowing water to run from the upstairs kitchen into adjacent bedrooms then down into the garage and laundry room. Pam called me, “What do we do!?”
Many questions: Who’s at fault? Does condo insurance cover this situation? Whose insurance does cover this? What if the seller didn’t have insurance (she didn’t)? Is their liability from the water purification company who had repaired this unit the week before? How did the buyer and seller react to this unwanted and unexpected event? And what about the moving truck that would shortly arrive to deliver their furniture? Ouch!
Check in for Part 2 next week to see how this real world event concludes.