Indianapolis Real Estate Blog and Real Estate Investments Resource

Contingencies in contracts will always exist. It is a rare thing to find a written contract which satisfies both parties right up front without a contingency.

In a sellers market, even if the buyer writes it with no contingencies, the seller will tack on a few of his own — must find home of choice, comes to mind. Even so, when sellers add contingencies, it’s usually only a couple that are easily remedied and which don’t cost the buyer much money. When buyers add contingencies, on the other hand, it means the seller may face delayed expenses (such has home inspection defects) or have the chance that the house may not sell at all. Here’s what I mean.

A Washington, D.C. area seller writes that he has “drastically lowered” his price, has a great agent and is “very realistic about the market,” but that he’s turned down two contingent contracts with unrealistic buyers. Having lowered the price to 30 percent below appraised value, the two contracts have both been contingent on the buyer selling his or her home first before completing the sale.

In further discussion, both buyers, according to this seller, are very unrealistic about the value of their own homes, and want to put them on the market way overpriced.

“They think my house is a great deal because I have lowered my price,” Tired Seller writes. “Then they write a contract based on the equity they ‘assume’ they have in their home. They want to list it way overpriced … . My plan is to just keep lowering the price until it sells. Any advice?”

First of all, if you’ve already drawn two contracts, then you may have hit the low-enough point. Now, work on the marketing and seller subsidies up front. In addition, before rejecting an offer outright, I would write a counter that the buyer can only list the property for a certain amount. Don’t say, “market value price,” go ahead and have your agent draw up a comparative market analysis on the buyer’s house and base the price on that CMA.

In addition, ask the buyer to follow the same modus operandi you have — be willing to drop the price every other week until it draws a contract. Write all this verbiage in the “Other Terms” section of the contract. Remember, in real estate everything is negotiable.

When a contract comes through, in a buyers market a seller needs to remember to keep his or her cool. You don’t need to roll over a play dead, accepting any terms the buyer offers. Remember, you have a contract in your hand. While the buyers may have dozens of other homes to choose from, they have chosen yours because it obviously fits their housing needs. They also obviously like your price, so now concentrate on the terms. In today’s market, if your house is priced right, then you only have to focus on terms to get a winning contract on the board.

The challenge of accepting a contingent contract in many MLS’s around the country, is that the status changes from Active to Under Contract/Contingencies. The problem with that is with so many homes on the market, 99 percent of buyer agents search only Active listings for their buyers — they rarely seek out UC/Contingencies status. Why bother? They are obviously in negotiation with a buyer already.

So switching the status may mean your home lingers toward closing while waiting for the buyers’ home to sell. On the other hand, the buyer becomes much more motivated to sell and may be willing to drop the price right away to elicit a quick sale.

The No. 1 contingency in contracts today is the home inspection. Instead of fearing this contingency, the astute seller will conduct his or her own home inspection and fix the problems before the buyer finds something later. Be tough on your own house. If it has an old air conditioner — have it worked on and serviced. Make sure all the plugs work properly.

If you are a do-it-yourselfer, make sure you have the permits or at least professional inspections necessary to show you did the work right. I’ve seen sellers redo the plumbing and/or electrical work of the previous owner who was a DIY because they just didn’t know it was done wrong.

In other words, the seller who anticipates the challenges from a buyer will be ahead of the game. Don’t wait till you “find out” that you have termites — look it up and uncover the defect before it’s a surprise. Be willing to accept contingencies, but also be willing to negotiate to make it work for you as well.

Would you like to know the value of your home for free? Just go to http://MyIndianapolisHome.com and fill out the simple form. You will receive a free CMA via email, no obligation to you!

Technorati Tags: listings, real, estate, homes, agent, selling

(Washington - May 17, 2006) - Indianapolis, Ind. was the nation’s most affordable major housing market for a third consecutive quarter in the beginning of 2006, according to the National Association of Home Builders’/Wells Fargo Housing Opportunity Index (HOI), released today.

Meanwhile, nationwide housing affordability remained virtually unchanged from the end of 2005, as slightly lower home prices and higher household income helped offset an upward movement in mortgage rates to keep the index almost flat. The HOI rose marginally from its lowest level on record, 41.0 at year-end 2005, to 41.3 in the first quarter of 2006.

“The latest HOI shows that only 41.3 percent of new and existing homes that were sold during this year’s first quarter were affordable to families earning the national median income,” said NAHB President David Pressly, a home builder from Statesville, N.C. “This is down from just over 50 percent of all homes sold in the first quarter of 2005 that were affordable to the average family.”

“Compared to the fourth quarter of last year, the median price of all new and existing homes that were sold during the first quarter of 2006 declined 1.5 percent, while the national median income, as calculated by the federal government on an annual basis, was adjusted upward from $58,000 to $59,600,” explained NAHB Chief Economist David Seiders. “These factors kept housing affordability from sliding further despite the fact that the national weighted interest rate on fixed and adjustable-rate mortgages rose 18 basis points in the period, from 6.21 percent to 6.39 percent.”

In the nation’s most affordable major housing market of Indianapolis, just over 90 percent of homes sold in the first quarter were affordable to families earning the area’s median household income of $65,100. The median sales price of all homes sold in Indianapolis during that time was $113,000 - down from $120,000 at year-end 2005. Also near the top of the list for affordable major metros was Youngstown-Warren-Boardman, Ohio-Pa., followed by Detroit-Livonia-Dearborn, Mich.; Rochester, N.Y.; and Buffalo-Niagara Falls, N.Y., in that order.

Four smaller housing markets outranked all others in housing affordability this time around, including Lansing-East Lansing, Mich. at the top of the list; Davenport-Moline-Rock Island, Iowa-Ill.; Lima, Ohio; and Battle Creek, Mich., respectively. Bay City, Mich., was the fifth-most affordable market smaller than 500,000 people.

Los Angeles-Long Beach-Glendale, Calif. maintained its standing at the very bottom of the affordability chart in the first quarter, with just 1.9 percent of new and existing homes sold in the area being affordable to families earning the median household income of $56,200. The median price of all homes sold in the metro during the first quarter was $500,000, which was unchanged from the previous HOI. Other major metros at the bottom of the housing affordability chart included Santa Ana-Anaheim-Irvine, Calif., followed by San Diego-Carlsbad-San Marcos, Calif.; New York-White Plains-Wayne, N.Y.-N.J.; and Nassau-Suffolk, N.Y.

Among metro areas smaller than 500,000 people, Santa Barbara-Santa Maria, Calif. was the least affordable housing market. Four other small California markets also fell at the bottom of the affordability chart, including Modesto as the second-least affordable small market, followed by Salinas, Merced, and Napa.

Please visit www.nahb.org/hoi for tables, historic data and details.

EDITOR’S NOTE: The NAHB/Wells Fargo HOI is a measure of the percentage of homes sold in a given area that are affordable to families earning that area’s median income during a specific quarter. Prices of new and existing homes sold are collected from actual court records by First American Real Estate Solutions, a marketing company. Mortgage financing conditions incorporate interest rates on fixed- and adjustable-rate loans reported by the Federal Housing Finance Board. The NAHB/Wells Fargo Housing Opportunity Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public.

About NAHB - The National Association of Home Builders is a Washington-based trade association representing more than 225,000 members involved in home building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction. Known as “the voice of the housing industry,” NAHB is affiliated with more than 800 state and local home builders associations around the country. NAHB’s builder members will construct about 80 percent of the more than 1.93 million new housing units projected for 2006, making housing one of the largest engines of economic growth in the country