A contingent contract is something that is useful in both a seller’s and buyer’s market. So it is important to know what it is, how it works, and how to use it to your advantage.

In a nutshell, a contingent contract means that something has to happen before the transaction can be closed. For the contingent buyer, they have their own house to sell. And that must be done for their lender to give them the money for the other house. For the contingent seller, it means they have to find a house before they will sell their house. Think of it like dominoes, one has to fall before the next one can.

Basically, a contingency is there to protect one side of the contract.

There are several types of contingencies, as there can be a contingency written up for almost any situation. So we cannot possibly talk about every type that can come up. However, we will discuss the two main ones you will run into in real estate.

Buyer Contingency

For the buyer’s out there, the “contingent” houses are the hidden jewels of the market. Why do I say that? Because somebody has already deemed it to be a great house at a great price…because a buyer made an offer and are trying to buy the house. And, it is hidden because most buyers do not include them in their home searches because they are not a default option in the searches. The buyer has to take an extra step to include them and so they disappear from most buyers’ searches.

But they shouldn’t disappear from yours, especially if you are a buyer who doesn’t have a house to sell. Here is why. As a non-contingent buyer, your offer is already stronger than the current one the seller has in hand. And that is before any financial terms are discussed. Because you are not waiting on a house to sell, you are ready to go. If you can match the financial terms, you are in a great position to get the house.

Those contingency contracts have in them what is called a “kick-out” clause. And it does exactly what the name implies. The seller can “kick-out” the contingent offer for a non-contingent offer. So when your offer comes in, the contingent buyers will have 48 hours to drop their contingency and proceed with the contract, or they will lose the house to you. Thing is, most with a contingency cannot get financing without the sale of their house. So they are out of luck and you slide in as the new buyer. Pretty sweet.

But you may be thinking, “I will have a house to sell too, so this doesn’t apply to me.” Not true. It still could apply. You do NOT have to be non-contingent contract to knock out a contingent one. Say what?  Yep, it’s the truth. If you have a house to sell, but it is on the market and already has a contract, guess what? Yours is still a stronger offer than the other one assuming they do not have a contract. And the seller could invoke the kick-out clause in favor of you. So don’t give up just because you have a house to sell.

So, as a buyer, make sure you include these in your searches. Most real estate websites have a way to do this. If you cannot figure it out, ask your Realtor to set you up on a contingent search. It is a great way to find a house in a hot market.

Seller Contingency

This is basically the same thing as a buyer’s contingency, but in reverse. This is used in a market where houses are selling very fast and a potential seller doesn’t want to end up homeless, or having to move into a temporary residence if they cannot find a house in a certain period of time.

In most cases, you will need to at the very least have your home on the market in order to make a contingency offer on another house for the seller to accept it. So, for sellers it can be a catch-22. They don’t want to put their house on the market and have it sell too soon, but cannot seriously look at houses without theirs being on the market. The contingency allows both to happen.

While that contingency can give the seller the warm and fuzzies, it doesn’t come without its downfalls. For one, buyers will take this into consideration when deciding whether to make an offer or not. Some buyers don’t want to be tied up in a contract that may never come to fruition and miss out on another house because they are waiting on the seller to find a house. For all they know, you may be the pickiest buyer ever, and pass up several great homes looking for the perfect one that may never come along.

Also, some buyers may not feel like they would need to honor the contract they made with you if something else comes along and back out of the contract. Now your house has been on the market a while and you might have missed out on a bunch of other buyers. So be careful when considering this option as it might backfire on you.

Overall, the use of contingency contracts can be a sound decision for virtually any type of market cycle an area can see. There will always be a purpose for them. However, one needs to be sure they understand what they are getting themselves into when it comes to signing one. Consulting with a knowledgeable real estate professional will help you know when to use it, and when not to.

Ok, so I pulled the title from that great disclaimer at the end of ads for attorneys on tv and radio. I love it because of the irony. The FCC (I assume) says lawyers can advertise, but at the end of it you have to tell people to NOT call based on the ad. Funny how this disclaimer is nowhere to be found on the infomercials at 3am. But I digress…

Here we will talk about how to pick an agent.

We have covered before why you need to use a Realtor, so I will assume you have now decided it is time to take action and hire one.

As I have hopefully impressed upon you in other posts, buying or selling a home is not something to be taken lightly, and who you hire as an agent can and does have a big effect on the entire process. So it is important to choose the right one for you.

There are thousands of agents in the Kansas City area. Somewhere around 7,000, I believe. Some more active than others when it comes to selling real estate.  So how do you go about finding the right agent to help you buy, sell, or both?

If you google “how to choose a realtor” you will find numerous websites with everything from “tips for picking an agent” to “red flags when picking an agent.” Everyone has an opinion on how to go about doing it. The problem is, while some of the advice is good. Some of it makes me wonder what the author’s goal is. Because it doesn’t seem to be the type of advice a reader will want to take. So I have put together some things to consider when looking at hiring an agent.

Do they live and work in the area you are considering buying or selling in?

This may seem obvious, but you would be surprised how often I see people hiring agents from a completely different part of town to assist them. There are a few major problems with this. For a seller, selling their house is mostly about connections. So how can agent from another part of town sell a house when they have very few connections in that area? Also, a listing agent needs to know the neighborhood, and most importantly, where potential buyers to that neighborhood are living now.  It is hard from agent who predominately works in another part of town to know where to go to find potential buyers.

From a buyer’s perspective, especially in a hot market, if your agent isn’t available to go see a new listing right away, you could (and probably will miss it). That agent in another part of town from where you are looking is going to have less availability to you than the one whose office is 5 minutes away. It may not seem all that important, but it is. Plus, many times an agent who works in that area also will know about new listings BEFORE they are even on the market in some cases. That can be a huge advantage for you. Why not use it?

Should I work with a family member?

Your cousin has been in real estate for several years, so you guess you have to use them, otherwise the family reunion will be super awkward. But consider this, what would be more awkward, explaining why you didn’t use them in the first place, or explaining why you had to fire them after things didn’t go as planned? Yeah…you know the answer.

Not that in all cases will working with a relative is a bad idea. It is just smart to consider all of your options and ask the honest question as to whether that relative is the best agent for you. And will working with them be an enjoyable experience? If the answer is yes, then go for it. If no, why put yourself through that just to appease family?

Here is a tip: you can work with another agent AND appease the family member. How? Just ask the agent you hire to pay your licensed relative a referral. Problem solved. You get the right agent assisting you, and the relative gets a little money for nothing. Everyone wins.

Experienced vs. Newer Agent –which is better?

On the face of it, most would think that when in doubt go with experience, because that is always better right? The answer: sometimes.

Experience can mean a lot of things. To most people, when they hear, “I have been in real estate for 20 years.” They think of it as this agent has been a top producer year in and year out and really knows the business. They remain current on the trends and know how to work in today’s market. However, that same statement could mean this agent has had their license for 20 years as a part time agent doing a couple deals a year. And they haven’t really done a great job keeping up with the current trends in the market place.

So which one are you talking to? Sometimes it can be hard to tell.

ALL agents basically have the same tools at their disposal. There are no patents, copyrights, etc. keeping any agent from being able to do anything another agent can do. But how (and IF) they use those tools is the separating factor between the good agent and the not so good.

It should seem pretty clear that the first experienced agent uses more of those tools in the tool belt than the part time agent does, right? Asking questions of the agent will help you know which one you are talking to. They should have a solid plan as to how they use their tools to sell your house. If they cannot really explain how something works, they probably are not using it (or using it well).

The same is true for a newer agent. When people find out an agent has been in the business for a couple years or less, their assumption is that they will be “learning on them.” And that the agent probably doesn’t know as much, or cannot serve them as well as an agent who has been in the business for several years. However, that is not always true. Sometimes the newer agents are more knowledgeable and better with newer trends. (If you have or are around the younger generations, think of how much better they are with technology than you are)

The newer agents are willing to work harder, think outside the box, and go to greater lengths sometimes because they are trying to get their business off to a good start. These agents haven’t established habits (usually bad) and are not bound by the “that doesn’t work” mantra that people get when they get set in their ways. So while they may not have much to show in the way of home selling experience, that might be a good thing.

Keep in mind that in most real estate companies (I know it is true in mine) these newer agents are never alone. Most have brokers and mentors working with them. These are seasoned professionals who have been through it all and are now assisting the new agents in learning how to do things. So in a sense you are getting two (or more) agents for the price of one.

So the answer to the experienced vs newer agent question is, it depends. You have to choose what is right for you and what you are wanting in an agent. The key is, don’t assume going in you know which is best before you have a chance to interview them.

Should commission rate be a consideration?

I wrote another blog about commission rates with real estate agents prior, which you can find on this site. So I won’t belabor the point. But when it comes down to it, the best answer to this question is the old saying, “you get what you pay for.”

This holds true in real estate just as it does in another areas of life. It doesn’t mean you have to spend the most money on everything to be happy with the product or results. But at the same time you have to live with the choices you make.

As you interview agents, you will find that there are some that stick to their commission rate, and there are some that are more than happy to cut their costs to get your business. The question is; does it make more sense to spend extra on a real estate agent if you can get the results you want for less money?

Real estate, commissions are a “success fee.” Meaning you only pay when the agent does exactly what you want them to do…sell your house. So who do you think will work harder to do so, the agent who would be getting their normal pay, or the one taking a pay cut? Just think of yourself and your job. If your boss gave you two projects to work on at the same time, one you get your normal hourly rate to perform, the other you get less. Which one will you work on first, and more diligently? I think you know the answer to that. And how does that affect the outcome?

Do you realize that the agent that cut their commission for you, probably has other listings paying them their normal commission? So now you are paying them less to do the same job. Guess who will be neglected!

And here is the kicker. You still have to pay them if the house sells. Even if that neglect lead to your house sitting on the market longer, costing you time and money. Perhaps causing you to miss out on the house you wanted to buy. So…was that lower commission actually saving anything?

Additionally, if you are paying your agent less, then they are probably going to have to offer the selling agent (the one with the buyer) less money too. Now you are asking the other agent to also accept less money for the same amount of work.

The lower commission also communicates a lot to the buyer’s agent, beyond just them not getting paid as much. They may be concerned with how much extra work they will have to do because the listing agent took a lower rate and isn’t as committed to it. The lower rate indicates you might not be easy to work with in negotiating all aspects of the deal, etc. And there are some that simply will not deal with all of that and skip over your listing.

Keeping in mind that the agents involved in the transaction have a direct impact on how smooth the process is for you. Sometimes better service comes at a price.

 Pick a Winner?

You have seen their face on billboards, their signs are in seemingly every yard and you have seen them cruising around town in the fancy sports car. Seems like the easy choice. They are obviously successful at real estate. And, you are probably right, they are likely very good at what they do. But, does that make them the right agent for you? That answer lies in what you want in the transaction.

Chances are; with this type of agent you are likely to be just a part of their big transaction machine. Nothing personal, just business. Get in, get out, collect the check and ask for referrals. You likely meet with the agent one time, and then from there on out you hear from an assistant. You are simply an address on a listing sheet.

For some people, that is just fine as they don’t need anything more as long as they get what they want in the end. They want to hand it all over to them, step back and let it all happen. If that is you, then go for it.

However, some people would prefer to have the process be more personal. They want to feel like the agent is working for them and not just for a check. They want to be able to call, text or email the agent and hear back from that particular person, not an assistant. Some people want to be more involved in the process of selling their house. Wants the agent to sit down with them throughout the process and go over things face to face.

For these people, they would find the “winner” agent wouldn’t meet their needs. They would be better off working with an agent who chooses to be less busy and has more time to work with them on a more personal level. Because in real estate, there is a choice as to how busy you let yourself become.

The key is to know which type of person you are, and what you want in an agent and hire one that fits that mold. You are the one hiring them, not the other way around. You should act accordingly.

In the end, probably the best advice about choosing an agent is to find out who your friends, coworkers, neighbors, etc. used and would recommend, since they are like-minded people to you, so you know that if they had a good experience, you are likely to as well. But don’t just take their word for it, interview a few of them. Then pick the one you feel the most comfortable with based on what you want in an agent. The entire house selling process will be much easier for you if you pick an agent that you have confidence in and relate to well.