Contingent Sales, Part 2

A reader posed a very good question recently regarding the impact of contingent sales and what happens to inventory numbers when a contingent buyer is unable to sell their current home.

If a sale is contingent and the buyer’s current residence doesn’t sell then theoretically the house they had in a contingent contract should come back into inventory as an active listing.  If this were happening a lot you’d expect to see the number of contingent units dropping over time and active inventory rising over time.  While we’ve only been collecting pending and contingent data for the past few months, we’re seeing exactly the opposite so far.

Contingent sales are going up steadily, while inventory is dropping significantly.  At this point in the cycle, sellers (and their Realtors) are getting smarter.  If a buyer makes a contingent offer the sellers are going to make sure the buyer is being realistic about the price of the home they have to sell first.

Are there contingent sales out there that won’t go through?  Sure.  But the days when buyers were making contingent offers based on unrealistic expecations of the value of their homes are long over.

-Frothing Mark

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3 Responses to Contingent Sales, Part 2

  1. ShortWoman says:

    In this day and age, I think most listing agents aren’t really letting sellers consider purchase offers that are “contingent on sale of real property.” In fact, good luck buying an REO property if you have to sell an existing home first! A lot of the properties currently listed as “contingent” are in fact “contingent on inspection”, contingent on other aspects of due diligence, or in some cases “contingent on short sale approval.” Most of the first two and many of the last will go pending and eventually sell.

  2. Lonnie Swaggerty says:

    Hmm… I found this info interesting. I’m normally a “glass half-full” kind of guy, but I think that America’s media, for once, is trying to be smart about how the numbers are reported considering the economic situation in general. We Las Vegans don’t have a wonderful public transportation system available (unless a scalding 125 degree bus is a luxury to some) and gas prices are eating a great portion of income. It only makes sense in the current economic state of the whole country that focus now turns to a “glass half-empty” paradigm because the Americans who took advantage of a loose credit/loan system (and the banks/agents who helped them out of pure greed) deserve to be spanked and watched with a discerning eye until the country crawls out of the complete slump that it is in.
    It doesn’t take a genius to get the real results – Clark County property records are open to the public and I like to check the facts myself on what the real lowdown for home purchases are in this city, because developers will tell me that everything will pick up and reporters will tell me that the sky is falling.
    Here is a very interesting article that I just read in the LVRJ:
    http://www.lvrj.com/business/24905714.html (“Condo buyers struggling for closure amid credit squeeze”)
    This might be a bit rash, but are your community’s condo units selling well at the current price or will there be a price drop on its way (or even more amenities)?

  3. frothingdeveloper says:

    Lonnie,

    Without getting into a sales presentation for ManhattanWest (which we’re more than happy to give you at our project website or at our sales center 🙂 ) our sales have been much stronger than those of other condominium projects.

    There are three reasons for this:

    1. We designed and priced ManhattanWest taking into account that the market was going to be more challenging. We are offering a much better value than the projects mentioned in the story you reference.

    2. The majority of our homes are priced below $450,000, and will qualify for purchase with an FHA backed mortgage. This will make it much easier for buyers to qualify. You still can’t go stated income with FHA, but there are still stated programs available if you know where to look.

    3. Our first phase, which consists of virtually all of the amenities and five of the seven buildings at the project is 100%, completely financed. We don’t need to lower prices to secure financing, and we’re not holding any unsold inventory because the project is still under construction. We have more than 60% of our homes in hard contract, and that’s several months before the first units are finished.

    The end result is that prices at ManhattanWest are holding steady.
    -Frothing Mark

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