earnest money & home selling

[leshoequeen]

Our house is on the market & we have a prospective buyer who is going to ask for a six month close date, contingent on the sale of their house.  If you were to accept that offer for a price around $200,000 what would you ask for in earnest money?  So much can change in six months that this seems like a pretty unrealistic deal for me.

[Pom]

What is your market like? I would in no way be interested in a 6 month close unless this benefits you. We paid $3k in earnest money or typically 1-2%. It probably varies by market/state as well. GL.

[leshoequeen]

I'm starting to wonder if the six-month close is actually a terrible idea. It doesn't benefit us. We haven't even been looking because we didn't want to find something we love without our house being sold.

[sunshineluv]

6 month close and contingent? Hard pass.

[dottyblue]

There is no way I would agree to this. Even in a slow market. I see no benefit for you, the seller and it would take some serious convincing (right market conditions, more earnest money, etc.) to see otherwise.

[leshoequeen]

Nov 29, 2016 12:01:06 GMT -5 Pom said:

What is your market like? I would in no way be interested in a 6 month close unless this benefits you. We paid $3k in earnest money or typically 1-2%. It probably varies by market/state as well. GL.

Also, I wouldn't say our market is terribly slow, but we are in the higher price range of our market. (LCOL area)

[sunshineluv]

What did your realtor advise? There is no benefit to you, if your house is still on the market in 5 months, they can put a new offer on your house with a 30 day close (would be my response)

[leshoequeen]

Our realtor just left it open for us to decide. Since they haven't actually made the formal offer, we don't even know that their dollar amount will be.

[goldengirlz]

A six-month close sounds excruciating. We had a 75 day close and that was bad enough. Earnest money doesn't really protect you because there are too many outs that they still have.

I would try to tighten the close date as much as possible. It would also be wise to have a kick-out clause -- meaning you're still allowed to show the house and if a non-contingent offer comes along, you can force them to close sooner or accept the new bid.

[mswax]

Could you do something like accept the offer, but continue to show the home? If you get a better offer, they can either remove the contingencies and bring in the closing, or you give them back their earnest money and take the other offer.

[UnderProtest]

The six month closing wouldn't bother me as much as the contingency of them selling their house. We had an extended closing on both selling our old house and buying our new one. Check your state laws about earnest money though. Some states it is completely refundable whereas others it is not. You could get screwed by that. All in all though, it doesn't sound great so far.

[leshoequeen]

Nov 29, 2016 13:11:00 GMT -5 UnderProtest said:

The six month closing wouldn't bother me as much as the contingency of them selling their house. We had an extended closing on both selling our old house and buying our new one. Check your state laws about earnest money though. Some states it is completely refundable whereas others it is not. You could get screwed by that. All in all though, it doesn't sound great so far.

Thank you, I will look into that.  What is the point of fully refundable earnest money?!

[moolarkey]

I think your agreement would be that you continue to market and show the house. If an offer comes in, they have 24 hours or 72hours to close, some small set amount, to close or you can accept the other offer.

[UnderProtest]

Nov 29, 2016 14:09:44 GMT -5 leshoequeen said:

Nov 29, 2016 13:11:00 GMT -5 UnderProtest said:

The six month closing wouldn't bother me as much as the contingency of them selling their house. We had an extended closing on both selling our old house and buying our new one. Check your state laws about earnest money though. Some states it is completely refundable whereas others it is not. You could get screwed by that. All in all though, it doesn't sound great so far.

Thank you, I will look into that.  What is the point of fully refundable earnest money?!

I wondered that too.  I believe when we sold our house in NC, it was $1,500 earnest money that was pretty much refundable.  Here in CT, you don't pay earnest money until after the inspection and its 10% non-refundable.  It is all crazy.

[leshoequeen]

Nov 29, 2016 14:51:01 GMT -5 UnderProtest said:

Nov 29, 2016 14:09:44 GMT -5 leshoequeen said:

Thank you, I will look into that.  What is the point of fully refundable earnest money?!

I wondered that too.  I believe when we sold our house in NC, it was $1,500 earnest money that was pretty much refundable.  Here in CT, you don't pay earnest money until after the inspection and its 10% non-refundable.  It is all crazy.

It is!  There are so many things to think about here -- I feel lost.  I wish we would just get a regular offer with a 30-60 day close, but this six month thing really throws a wrench into it!

[imojoebunny]

How bad is your market? No way would I entertain a 6 month contingency offer I would say thank you, and if the house is still on the market in 4 months, you hope they will make another offer.

There might be a way to do it, where you are willing. My parents once essentially paid rent (sellers retained the house) to hold a contingency for a number of months, so they paid each month (about the mortgage payment) to continue the contingency and didn't get that money back, whether they bought the house or not. It was a very unusual situation, though. I have never heard of it outside of very specific circumstances.

[leshoequeen]

Nov 29, 2016 17:03:29 GMT -5 imojoebunny said:

How bad is your market? No way would I entertain a 6 month contingency offer I would say thank you, and if the house is still on the market in 4 months, you hope they will make another offer.

There might be a way to do it, where you are willing. My parents once essentially paid rent (sellers retained the house) to hold a contingency for a number of months, so they paid each month (about the mortgage payment) to continue the contingency and didn't get that money back, whether they bought the house or not. It was a very unusual situation, though. I have never heard of it outside of very specific circumstances.

That is really interesting. I'll have to mention this sort of arrangement to my realtor, thanks!

[namasteak]

Nov 29, 2016 17:03:29 GMT -5 imojoebunny said:

How bad is your market? No way would I entertain a 6 month contingency offer I would say thank you, and if the house is still on the market in 4 months, you hope they will make another offer.

There might be a way to do it, where you are willing. My parents once essentially paid rent (sellers retained the house) to hold a contingency for a number of months, so they paid each month (about the mortgage payment) to continue the contingency and didn't get that money back, whether they bought the house or not. It was a very unusual situation, though. I have never heard of it outside of very specific circumstances.

I believe noodleskooze rented her old house from the buyers for a few months after selling.

[imojoebunny]

Nov 30, 2016 15:40:43 GMT -5 namasteak said:

Nov 29, 2016 17:03:29 GMT -5 imojoebunny said:

How bad is your market? No way would I entertain a 6 month contingency offer I would say thank you, and if the house is still on the market in 4 months, you hope they will make another offer.

There might be a way to do it, where you are willing. My parents once essentially paid rent (sellers retained the house) to hold a contingency for a number of months, so they paid each month (about the mortgage payment) to continue the contingency and didn't get that money back, whether they bought the house or not. It was a very unusual situation, though. I have never heard of it outside of very specific circumstances.

I believe noodleskooze rented her old house from the buyers for a few months after selling.

Rent back after purchase is common, but paying for the extended contingency is different.  The purchasing party does not buy, nor does the selling party forfeit control or use of the property, seller retains all right, with the exception of the contract to buy at a given time in the future, if certain conditions work out, in exchange for a fee paid at agreed upon intervals.  It is different from earnest money, since it is non refundable, and only for the right to purchase, not for other contingencies, like inspection, that may arise, once the contract to purchase and financing approval is available, which is usually less than 60 days before close, and often much less.  

[glynn]

I just bought a house and while waiting on the closing I rented the house and moved in. It was vacant and I had to move out of my rental. If I had backed out they would have gooten to keep a full months rent plus $500 deposit and the earnest money. I sold a house in May that we had a contract on in Feb that the people backed out 1 day before closing because they disclosed to the bank that they lied on the applicaion and we had no recourse and was already paying rent at the new place with a lease. It sucked. I have bought a house and sold a house with the contingency of the other party selling first and never had a problem. Good Luck with whatever you choose.

[namasteak]

Thanks for clarifying imojoebunny . I must have misread.

[teatimefor2]

Year ago, I think 2004, my DH purchased a home, but the owners selling it wanted a long closing. It was going to be a rental property; so we had a regular length closing and then we rented to home back to them for the remainder of the time they wanted. It worked out well; they wanted their daughter to finish the school year, but were being transferred. It ended up being a win-win for all.

[july]

Make sure you check with your realtor on how the house would be listed if you accepted the offer but continued to show. It may generate fewer showings.

[thatgirl2478]

It can work differently in different states, but in IL having the offer contingent on a sale is separate from the closing. So in the initial offer they say 'hey it's contingent on the sale of our house' so the contract doesn't become active until your house sells. Then at that time I think you can change the close date.

A 6 month close is ridiculous. 6 months to sell your house, possibly not ridiculous in some areas. But yeah, you can accept a 'contingent to sale' contract & still show the house. It might scare off some buyers but not all.