This blog post is all about the Contingency for sale of Buyer’s property (COP Form)...And how it affects the Seller.
A home sale contingency is clause included in a real estate sales contract or an offer to purchase. With a home sale contingency in place, the transaction is contingent on the sale of the buyer's home. If the buyer's house sells by the specified date, the contract moves forward.
Buyer is not obligated to move forward if their home does not sale. So, this limits the risk for the buyer.
The form that is used to add this contingency to a contract is the Contingency for sale of buyer’s property AKA COP Form. There are different ways this form can be completed, and what it means to you as the Seller. It’s important have a detailed discussion with your Realtor if you receive an offer from a buyer and this form is included.
When accepting an offer with a contingency sale, there are 3 things to be aware of:
#1 – Is this contingent upon a concurrent close?
Meaning: The buyer has to sell their home and close escrow before they can close escrow on your home.
Risks: If you go all the way through the transaction and the buyers remove their inspection, appraisal, and loan contingency, and THEIR transaction on THEIR home falls through, they can cancel your transaction and get their deposit back.
#2 – What is the status of the buyer’s property?
Meaning: Not Listed, Listed, Pending?
Risks:
- Not on the market yet? If their property hasn't been listed yet, why not? If you accept their offer, you are agreeing to take YOUR proerty off the market while they list their property and try to sell it.
- Listed at value? If it is listed already, why haven't they found a buyer yet? Has it been on the market for a short period? Or, has it been listed for a while- which means it could be overpriced.
- Do they already have an accepted offer on it? Which means, they have buyers that are potentially just waiting for them to find a replacement property (buying your home). Look at how legitamite their buyer on THEIR home is.
#3 – Is there a Release Clause? Or has it been removed from the contract?
Meaning: The release clause allows the Seller the right to accept a back up offer and if a back up offer is accepted, the seller would give the buyer a 2 day notice to remove the contingency to sale their home. The other option is to put a time limit of when the release clause goes into effect, or remove it all together. (no longer more or less)
Risks: If you have the release clause in effect, that means you cannot back out even if you get a backup offer. You're bound to the buyer until they default. If the release clause is implimented to be used after a # of days, then you have to wait until that # of days has passed before you can serve the 2 day notice. If there is no release clause in effect, then you can accept a backup offer and serve the notice to the buyers at any time.
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Hi, we're Chantel Henson and Betty Stringer and we'd love to assist you. We are a mother-daughter team, committed to assisting you with your Real Estate needs! Providing you with Local Real Estate updates and advice for Monterey, Santa Cruz, Santa Clara, & San Benito County's real estate market for over 24 years.
We will provide you the FACTS! For an honest answer, call us. Our goal is, not to make a sale, but to create a Customer for Life!
Whether you're in the research phase at the beginning of your real estate search or you know exactly what you're looking for, you'll benefit from having real estate professionals by your side. We'd be honored to put our real estate experience to work for you.
Chantel Henson & Betty Stringer
Broker/Owner & Broker Associate
Realtors®
DRE # 01271580 & 02042438
[email protected]
VANCO Real Estate Executives
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***Disclaimer- A Realtor has a fiduciary duty to Buyers and Sellers individually. Our goal is to have a strong knowledge base of contracts. However, we are not Real Estate attorneys. Please contact a Real Estate attorney for more information about how to protect yourself from liability and Real Estate contracts affect you and your situation directly.***