More escape clauses for buyers
The 72-hour contingency clause can work for both parties.
NEW YORK (CNNMoney.com) -- As housing markets have cooled, buyers are making demands that wouldn't have flown during frothier times.
"The market has turned in the direction of buyers," say Chuck Bartolo, a broker in Spencertown, New York. "They're feeling empowered."
In addition to agreeing to make more repairs, to lower their prices and to throw in extras to get deals done, sellers are also more willing to accept contingency clauses in the contracts that make the sale dependent on certain conditions being met.
One such contingency is for a house to pass an inspection. If the inspection turns up too many problems, the buyer will ask the seller to correct them. If the seller refuses, the buyer may withdraw without penalty.
Another contract clause may make the sale contingent on obtaining financing. It's usually best to line up a mortgage before making an offer but many people wait until they're ready to buy before they put their financing in place. If they fail to obtain a mortgage, they can get their down payment back.
"A year ago," says New York City real estate attorney, Neil Garfinkel, "you couldn't get any contingencies written into a contract. They are now finding their way back in."
"Demand was so high," says Marilyn Hottle, a broker with Coldwell Banker Camelot in Mt. Dora, Florida, "that even appraisals didn't seem to matter. The appraisal would come in at much less than the selling price and the buyer would take it anyway."
There's a limit, even in these slower times, to what contingencies most sellers are willing to accept. Most sellers will still not make the sale of their property contingent on the sale of the buyer's home, according to Garfinkel. That's a very onerous clause, tying up the seller's property for weeks and giving no financial benefit if the buyer opts out.
During slow markets, however, buyers may not want to commit to a deal without being able to sell their old house first, if it means losing their earnest money. That can account for as much as 10 percent, more typically 4 or 5 percent, of the home's purchase price.
Sell then buy
There is an alternative - the 72-hour contingency. It gives a little bit to both parties.
Here's how it works. The seller continues to market the house even after a contract is signed. If it attracts another offer, the original buyer has 72 hours to decide whether to go through with the sale - and try to sell the old house afterwards - or drop out, getting the earnest money back.
For sellers, the 72-hour contingency means the sale will be more likely to go through speedily, either to the first buyer or to a later one. In effect, the 72-hour clause doesn't remove the property from the market.
Buyers gain because they get some protection from the risk of losing earnest money if they can't sell their old house in time.
How common the 72-hour clause has become depends on local conditions. Says Mary White, a real estate broker in Great Barrington, Massachusetts, "The only time we do a 72 hour is when someone really must sell their home first."
David Bain, a Connecticut broker, says, "Every brokerage firm has one or two a year."
Hottle says they're increasing only minimally in her territory near Orlando, even though, she says, "They can be in the interest of both parties."
She says they only tend to occur during real buyer's markets. Even in a balanced market, she says, "Sellers are reluctant to offer this kind of contingency."
Fred Stettner, a real estate broker in Rensselaerville, New York, doesn't like them. He says some of the buyers who ask for a 72-hour contingency "are not really solid customers." They may only want the 72-hour clause embedded in the deal to have an easy way out if they get cold feet.
And, he says, "Some agents are not going to work as hard selling the house if they already have an offer."
These days, many sellers are not taking the first offer they get for granted. Even without a 72-hour contingency, says White, "Sellers often want us to continue to market their home despite having an acceptable offer already."
Garfinkel doesn't expect the types or numbers of contingencies written into contracts to change if markets grow colder. He thinks the impact will be more on prices than on contract details.
Right now, we're in a fairly balanced market, in his opinion, and that has certainly helped buyers out.
"There's much more parity," he says.