How to Use First Right of Refusal on Contingent Offers

Tips for Buying a Home Without a Contingency to Sell Your Existing Home

Sellers generally don't advertise that a contingent offer is acceptable. In fact, some won't even consider a contingent offer -- meaning the buyer needs to sell an existing home before the buyer can fulfill the terms of the contract to purchase -- because they don't understand how it works.

In most cases, it's no skin off the seller's nose to accept a contingent offer. Sometimes it's the motivation needed for another buyer to submit an offer to purchase. Why? Because the desirability of a home seems to go up when somebody else wants it.
The problem that arises is when the seller receives another offer and tries to kick out the first buyer by invoking a Notice to Perform. Some buyers slink quietly away. Some will fight tooth and nail. For the latter, here are five ways a home buyer can remove the contingency to sell  and move forward with the transaction.

How to Use First Right of Refusal on Contingent Offers

First Right of Refusal lets a buyer decide whether to remove a contingency to sell or cancel the transaction.

Making an offer to buy a home when your own home is not yet sold is a dilemma for many home buyers. Regardless of whether it's a buyer's market or a seller's market, sellers aren't too eager to accept an offer that iscontingent on sale of a buyer's home, either. But especially in buyer's markets, you will see an increase in offers with a contingency to sell the buyer's home. 

Types of Sale Contingent Offers

Although there are many variations of a contingent offer most adhere to one of two formats:

1. Seller will keep the property on the market but accept a contingent offer, providing buyers with a 72-hour first-right-of-refusal notice to perform in the event seller receives a better offer.
2. Seller will take the property off the market and wait for the buyer to sell the buyer's existing home.

The likelihood is the seller will choose option one. The reason a seller would accept option two is if there are not likely to be any other buyers making an offer to purchaseMost sellers will not wait forever and will stipulate a date for the transaction to close. If the buyer's home has not sold by that date, the transaction can cancel.

What is a 72-Hour Notice to Perform?

The notice to perform can be of any agreeable duration, 24 hours, 48 hours or any number of days. The time period is negotiable. First the seller sends the 72-hour notice to perform to the buyer, informing the buyer that another offer has been received and the buyer now has 72 hours to remove the contingency to sell the buyer's existing home.

If the buyer does not remove the contingency to sell, the seller has the right to demandd a cancellation of contract and refund the earnest money deposit to the buyer.

Options for Removing Sale Contingency Under First Right of Refusal

• Obtain a bridge loan. It is best to get preapproved for a bridge loan before receiving the 72-hour notice to perform. This way, you won't be scrambling around trying to line up financing over an impossible 3-day period. Bridge loans are an expensive option because you will pay loan fees.
• Tap a home equity line of credit. Most lenders will not give you a home equity loan once your home is on the market, and a seller is not likely to accept a contingent offer unless your home is on the market. But it's not a Catch-22. If you set up a home equity line of credit before you put your home on the market, you can simply transfer funds or write a check.
• Change your mortgage to a higher loan-to-value. If you were planning on putting down, say, 20% to buy your new home, put down less and get a higher mortgage amount. Then, when your home eventually sells, you can use the proceeds to pay down the mortgage. Be aware that many higher loan-to-value ratios carry higher interest rates.
• Borrow the down payment from a relative. Some home buyers tap the bank of Mom and Dad when an emergency arises. I don't know if buying a new home constitutes an emergency in your family, but in some families, it does. Perhaps Uncle Joe will give you that inheritance early? Might not hurt to inquire.
• Remove your sale contingency and hope for the best. I know what you might be thinking right now: "Is she smoking crack?" But if you are confident your home will eventually sell, some buyers choose this option.

Bottom-line Risk for Removing Sale Contingency

Before you remove a sale contingency, review your purchase contract with a lawyer and obtain legal advice to determine your rights under the contract. California purchase contracts, for example, clearly state your earnest money deposit is at stake if you default on the contract. How much did you put up? $1,000? $5,000? $10,000? If you can live with losing that amount by taking a gamble that your home will sell, it might be worth it to you. 

Evidence of Funds to Close

When a contingency is removed, sellers often ask for evidence of funds to close. This prevents buyers from arbitrarily removing a contingency without an actual intention to close. If a relative has the funds, typically a gift letter from the relative and copy of bank statements or stock accounts is enough to satisfy your lender and the seller.

By Elizabeth Weintraub,

Losing Your Home? Salt Lake Board of Realtors Podcast April 16th 2012

A Great Article - 7 Ways to Murder Weeds With Household Items

Here are 7 ways to murder weeds with household items. You’ll save money and show no mercy to your garden’s uninvited guests.

Layers of wet newspaper, buried under mulch, will smother weeds and prevent new ones from growing. Image: Jami Scholl/My Edible Eden

Nothing ruins your garden or yard like weeds, those uninvited guests that rob your plants of space and nutrients. So murder those weeds most foul, but without harmful chemicals that can do you in, too.

Who says you need standard weeding tools to kill weeds? Here are 7 ways to kill weeds with weapons you already have around your house.

How to kill weeds

1. Newspaper: A carpet of newspaper, which blocks sunlight and oxygen from reaching the soil, will smother weeds already sprouted and prevent new ones from growing. Throw down newspaper in 10-sheet layers, wet to hold it down, and cover with an inch or two of mulch. If weeds begin to grow in the mulch, add more layers, making a mulch-newspaper lasagna, which eventually will decompose and nourish the soil.

2. Old shower curtains and carpet samples: Spreading these useless items in garden paths or between rows will keeps weeds from ever showing their unwanted heads. Cover with mulch.

3. Corn gluten meal: This corn by-product stops seeds from growing into weeds. Since the meal will prevent germination, spread it around established plants, and after seedlings and transplants have taken hold in the soil. After harvest, spread the meal to prevent late-season weeds. 

4. Vinegar: The acetic acid in 5% vinegar is a desiccant that sucks the life out of plant leaves. It’s most destructive to young plants with immature roots, though it just rolls off weeds with waxy leaves, like pennywort or thistle.

Make sure you cover desirables before spraying, because vinegar is an equal opportunity killer. Keep your spray on-target by removing the bottom from a 2-liter plastic soda bottle, and placing it over the weed. Spray vinegar into the mouth of the bottle, which will keep it from splattering on your vegetables.

5. Vodka: Don’t know if vodka makes weeds fall down dead or drunk, but 1 ounce mixed with 2 cups of water and a couple of drops of dish soap will dry out weeds that live in the sun. Doesn’t work that well on shade-loving weeds. Protect desirables, because vodka will dry them out, too.

6. Soap: The oil in soap can break down waxy or hairy weed surfaces, making them vulnerable to desiccants. So add a few drops of liquid dish detergent to vinegar or vodka sprays to keep the solution on leaves. The soap also makes leaves shiny, which will help you keep track of what you’ve sprayed.

7. Boiling water: After you’ve made yourself a cup of tea, take the kettle outside and pour the boiling water on weeds, which will burn up. This is a particularly good way to whack driveway and walkway weeds, because the boiling water can run off impervious surfaces and cool before it reaches border plants.

Lisa Kaplan Gordon is a HouseLogic contributor and builder of luxury homes in McLean, Va. She’s been a Homes editor for Gannett News Service and has reviewed home improvement products for AOL.

Image: Jami Scholl/My Edible Eden

Grand Pyramid in Maricopa, Arizona

2457 S Warren Rd, Maricopa AZ
For sale: $495,000

Rising out of the desert is a grand pyramid. Guarded by two gold statues, the pyramid has stood watch  over the Arizona landscape for 24 years.
Wait....Twenty-four years? Arizona?

It’s not quite what you’d expect when you hear the word “pyramid,” but situated on 13 acres in Arizona is a pyramid home that looks like it belongs in Giza, not in the city of Maricopa.

Unlike the ancient buildings built to house the tombs of kings, this particular pyramid is a single-family home designed and built by a couple who have an affinity for Egyptian culture. And while it’s not filled with gold, it does have more than 3,000 square feet of living space and two master bedrooms. Also, unlike the pyramids in Giza, this structure is for sale.

Listing agent Glenn Marsh of All For 1 Real Estate says despite the home’s monolithic shape, the interior is a light-filled, open space with three levels of living areas.

“The home starts 6 feet below grade, sort of like a poured-concrete basement,” explained Marsh. “You go in and there’s the large main living area with dining room. There’s another story on the side that has a bedroom and an office, and another level at the peak of the pyramid that holds the master bedroom.”

Beyond the unusual design of the house, Marsh says the best part of the home is its setting, which affords sweeping views of the surrounding desert and mountains in what Marsh describes as a pretty pristine area. In the same way the ancient Egyptians gave their kings a setting fit for eternal enjoyment, this Arizona home is also makes for a pretty splendid earthly location.

See the Article

Propery Investing...Go for the Long Haul...

Rental Property Investing – Tips for Future Property Moguls

The media and real estate professionals continually report that 2012 is the year to buy real estate. Since home values have dropped considerably, the U.S. median list price has dropped considerably, too. Couple that with interest rates that are the lowest they’ve ever been,  it’s a perfect storm of real estate buying opportunity, especially for starting out your career as a landlord.

Note: If you are one of those folks that believes you can predict the future and hopes prices will go down, they may. But interest rates might go up which would nullify any gain you would hope to obtain from any price decrease.

But more importantly, all investments fluctuate in value over time. You should not be concerned about short-term fluctuations in a long-term investment, like real estate.

If you buy sooner over later, ten years down the road not only will you own more properties overall than someone who waits, but you’ll most likely have earned significant equity in all of them. And you won’t care about any price fluctuations that might have occurred in 2012, 2013, or 2014.

Here are tips to get started. And, if you start a few years out of college, and amass several properties, you will probably be retiring early.

Go for the long haul — Rarely do people increase their wealth by owning property for short periods of time. Long-term investing in cash flow-producing assets like real estate is the way to go.

Don’t’ give up your day job! – You need a solid job to be able to save money for a down payment and be able to obtain financing to buy properties.

Buy cash flow-positive properties – If you don’t understand why to do this, you might want to skip real estate ownership. See “What is a Good Real Estate Investment” article.

Buy a property that you love! – The more you love the property for all the right investment reasons, the better chances you’ll own it long term.

Skip the prize properties – Prize properties have negative cash flows and are NO prize, it’s the moderately priced properties that are the real prizes.

Buy as a personal residence to change to rental – Buy properties in life that make good rental property investment sense and first live in them as a personal residence. When you buy as owner occupant, you get the best financing and can put down a smaller down payment if you so desire. Plus you learn the property characteristics, issues, and can fix issues so they won’t be issues once you make it a rental. Then, move out after one to three years and into your next personal residence that will become a rental property a few years later. This also ensures you will only buy properties in areas where you are willing to live, and that’s very important to do as a real estate investor.

If it sounds too good to be true, it is! – Real estate is high risk as there are many things that can go very wrong. If it sounds too good to be true, be very careful. Once you take ownership of the property, you have to correct the problems and issues, or live with them.

Fully educate yourself for 3-6 months – Talk to other people who own properties, read books, go to the local real estate investment clubs, etc. The better you educate yourself, the higher the chances you will take the proper steps to reduce your risks and make smart and safe decisions.

Buy properties in good shape – Fixer-uppers are money pits and rarely sell at a large enough discount to compensate for all the work needed. Buy properties that are as close to rental ready as possible. A great move, if possible, is to buy a property with a good tenant already renting the property!

Be conservative on your expectations – Always overestimate the amount it will cost to renovate a property, underestimate the rental income you will earn, and overestimate the expenses you will have to pay. Then, when you blow it out of the water, you’ll have a big smile on your face and be able to gloat to all your friends!

Stay away from high vacancy areas or declining cities – Buy properties in nice, moderate, working class areas where there are not too many foreclosures, empty properties, or in a city or area that is in decline.

Start young, but not before you are settled in a particular city – You want to start early, but make sure you’re somewhat settled before you take on this big responsibility. Have fun when you are young, there is still plenty of time to get rich on real estate. Just start saving your pennies for that first down payment.

Death, taxes, and…. – Those two items are guaranteed in life. But, there is one more item if you are a real estate investor, and it’s 100% guaranteed: If you own real estate, you will feel pain along the way. Things will go wrong, but you will recover and will likely look back on the journey with fondness when you retire early.

And let’s end where we started, once again with the most important item in real estate investing:

Go long! – Long-term ownership will give you the highest chances of entering retirement with a nice rental property cash flow stream. And long-term ownership equity gains will compensate for the hassles and issues you have along the way.