When you’re selling your home, a buyer may present you with an offer that is contingent upon the sale of the buyer’s current home, which may or may not be currently in escrow.
If the buyer’s home is not yet on the market, this raises a red flag because by the time, they put it up for sale you may have already found a buyer who does not have a contingency. If the buyer’s home is currently under contract you are somewhat safer, but you might consider adding a right of first refusal clause to the offer to protect your interests. This clause would allow you to accept a contingent offer and, at the same time, keep your property on the market. You might attract another offer without a contingency.
Most right of first refusal clauses contain language that details how, if you should receive another acceptable offer, you must notify the buyers in writing and give them a specific amount of time to remove the contingency and move forward on the contract. If the buyers are not able to remove the contingency regarding the sale of their home, you are then free to return the first buyer’s earnest money and accept the new offer.
A right of first refusal may sound like a win-win situation for the seller, but it does have potential drawbacks. A highly motivated buyer may not be willing to wait the time that is extended to the initial buyers to remove the contingency. Some prospective buyers may not be willing to look at a home if they know a contingency contract exists, even with a right of first refusal clause.
If you accept an offer with a right of first refusal clause, make sure that your interests are protected and that you review the buyer contingency addendum that is included with the buyers' purchase contract. Your real estate agent can advise you on these negotiations and see that the agreement is properly phrased to avoid difficulties and delays.
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