Keeping up with Chicago's North Shore Real Estate Market!

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Thursday, August 14, 2014

I was surprised to see...

This popped up on my Facebook account this morning -- I answered this questionnaire a long time ago, so I was surprised to read it this morning!

Agent Snapshot: Ann Jones, Broker, Berkshire Hathaway Home Services Koenig Rubloff Realty Group, Lake Forest

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Tuesday, August 12, 2014


I was recently talking with a friend.  Her mother-in-law was selling her condo in another state, which shall remain nameless.  Suffice to say, it's a state in which real estate is generally sold without attorneys.  That is, real estate agents work directly with title companies and do many of the legal functions that agents in Illinois (by IL law) can't perform.

Don't know the specific details of this transaction,  but apparently their real estate agent failed to mention that there was a home sale contingency.   His explanation was, "Well, you signed the contract.  Didn't you read it?"

This condo is now sitting on the market waiting -- under contract -- waiting for the buyer's property to sell.  The worst part of this contingency, was that there was no end-date on it.... an ugly situation!

Contingencies -- they can be a real bug-a-boo when buying or selling properties.

In our market, about 99.9999% of the time, offers have a home inspection contingency and an attorney review contingency.  I think both of these contingencies are fantastic protections - particularly for the buyer.  But in the above mentioned situation -- an attorney review contingency would probably have protected the seller. 

Attorney Review Contingency
This type of review is pretty standard on the North Shore.  After an offer is signed by all parties, the buyers and sellers can have their respective attorneys review the contract.  If there is something that the attorneys disagree on (except for sales price!), either party can cancel the contract.   It's a safeguard for both the buyers and the sellers.  

Inspection Contingency
An inspection contingency gives the buyers 10 days to get the property inspected by a licensed inspector.     If they see a health and/or safety issue they can get out of the deal if they so desire.  For example, I had a client who inspected a house this spring.  They felt that the foundation was insecure... clearly a safety issue.  They advised their attorney that they didn't want to move forward... contract was null and void without any penalties.   It also allows the buyers to make sure that the seller has provided full disclosure about the property.

While these are pretty standard contingencies, there are others that sellers need to really consider seriously before they contractually agree to them.  

Home Sale Contingency 
A home sale contingency favors the buyer and can be a real disadvantage to the seller.  What it means is this: The contract for the sale of this property is contingent on the buyer being able to sell their own home.   For the seller it means they are taking their property off the market and waiting for the buyer to get their home sold.  Typically when sellers agree to this they put in a lot of caveats such as the buyer's home has to under contract in 30 days or sellers reserves the right to continue marketing the property.  

Home Close Contingency
A home close contingency is generally a little safer for the seller than a home sale contingency.  It means the deal is contingent on the buyer closing on their property as planned.   For a seller to agree to this contingency, the buyers' house generally has to be already under contract.

Mortgage Contingency
With a mortgage contingency, the contract allows a limited amount of time for the buyers to be approved for a mortgage in order to buy the property. If the buyers aren't approved within the time frame, then the contract can be voided.  Again, it's in the seller's best interest to set a limited time frame for this be in effect.  

It usually all works out and people are able to sell and buy at the same time.  There are often questions about logistics because sometimes one person needs to move out of a home while another is moving in.   Sometimes there can even be a domino effect that involves multiple properties --  if one sale falls through it may impact two or three other sales.

Unless my clients can afford to own two homes, I encourage them to get their house sold before they begin making offers on other properties.  Contingencies can weaken their bargaining power.