Negotiating a Successful Deal: The Contingent Offer
Madeline explained that a “contingent” offer was one in which the buyers said they would purchase the home, provided they could sell their existing home. The new purchase was contingent on the sale of the old property. If Sondra and Dana couldn’t sell their existing home, then they weren’t committed to purchase the new property.
Sondra and Dana said that sounded perfect. They were completely protected. Then Dana said, “Now, let’s see if we can negotiate the sellers down in price.” Their agent, Madeline, held up her hand. “I don’t think so,” she said.
She pointed out that a contingent offer was a weak one. “You’re asking the sellers to agree to wait to sell their home until you first sell yours. If you can’t sell, they’ve waited for nothing. In effect, you’re asking them now to worry about the sale of two properties instead of one.” “That’s asking a lot of the sellers, isn’t it?” said Dana.
“Yes, it is,” replied Madeline. “And if you want to get your deal, you have to give them a reason to go along. If you now try to cut their price, you’re asking them to make two major concessions—one the contingency, and two the price cut. Maybe in a very slow market they might accept. But the market here has been very hot, there are a lot of lookers, and their agent said they were expecting other offers momentarily. “Therefore, in order to get the deal, my suggestion is that you come in at full price. Or, perhaps, even over the asking price!”
Dana looked askance. “I can’t imagine offering more than full price. Particularly since we’re offering them a cash deal. We’ll come up with a cash down payment on a new loan, which means all cash out to them. That’s a good deal for them.”
Madeline nodded. “Yes, it is. Perhaps we can get it for full price. But, keep in mind that over the past few months in this hot market, many properties are selling for thousands over the asking price. Getting them to accept will be a close thing.” Dana and Sondra nodded, and Madeline drew up the full price contingent offer.
TIP
When negotiating, it’s important to see not only your own perspective, but the other side’s as well. Always be ready to give up something to get something. Just be sure that you don’t mind what you’re giving up, and that you really want what you’re getting.