Expert: Ray Beggs - 7/6/2006

Question
Ray,

My husband and I were going to make a full offer on a townhome that we had viewed on the MLS listing.  This particular property had been on the market "active" for 30 days according to the MLS.  The seller accepted a "contingent" offer on 06/24/06 from someone else before we had a chance to make our full offer on the seller's asking price.  We really feel this place would have been ideal for us.  

Question #1 In California does the contingent offer have an expiration date should the buyer not sell his house by a certain time? ( I ask this because on the MLS listing it states that it is "Contingent as of 06/24/06). Q #2  Someone told me that the seller can accept a full offer for the asking price from a different buyer while it is listed as contingent. Is this true? My friend says the contingent offer is no longer valid since the full offer takes priority if the seller accepts it?  Is this true?

Answer
Hi Cindy,

Thanks for the question.

"In California does the contingent offer have an expiration date should the buyer not sell his house by a certain time?" A contingency doesn't "expire" but the seller and buyer may have something in their contract that gives the seller a chance to take another offer at some point. It could say that the buyers have 21 or 30 days to sell their home or the seller can take a backup offer or they could have a clause that says that the buyer must remove their contingency (sell their home) within 3 days after written notice from the seller to do so.

"Someone told me that the seller can accept a full offer for the asking price from a different buyer while it is listed as contingent. Is this true? My friend says the contingent offer is no longer valid since the full offer takes priority if the seller accepts it?" It is not true that the contingent offer is no longer valid but it may true that the seller activates a clause in the contract to accelerate the time period that the buyer was given to sell their house.

Now, I have to point out that what happens most of the time when a buyer is given a notice to perform (to sell their house or cancel the escrow) they simply change the deal to not be contingent. They do this by removing the fact that they have to sell their house to buy the new house. This would mean that they would cancel the contingency and move on with the deal buying it through a bank. They will still have to sell their house later, but they will take out another mortgage to buy the current house. They, in a sense, become noncontingent because they will temporarily have 2 mortgages.

If it turns out that you do not get this townhouse, I'm sure that there is another one out there that will be even better for you. That's the way it always goes and I've been doing this for 22 years! Just keep looking and I'm sure it will work out.

Good luck,

Ray