Reader Question: Our home is currently on the market, and we are actively looking. It has only been two weeks, and we have had three showings, and no offers yet. Our agent seems to think that we are going to have a hard time getting an offer accepted on a new place contingent on the sale of our current home. It also means we will have to act fast to find a house when an offer appears. Is our agent's inclination correct? How typical is a contingent offer on the sale of the buyers home? Are we wasting our time making contingent offers?

Monty’s Answer: The answer to the correctness of your agent's inclination depends on four separate conditions; the demand in the market price range you are searching, the seller’s circumstances whose home you want to buy, the pricing of your home, and the drafting of the contingency.

Conditions are the key

Some markets favor the buyer so that the seller may be better off with a contingent offer than no offer at all. Some sellers may like the idea of having additional time to make arrangements on their end. If the contingency also has a well-drafted bump clause, a contingent offer can be successful. Contingent offers are not frequent in a seller's market but are common in a buyers market. Determining if the conditions above are present is the key to whether or not you are wasting your time. The fact your agent feels you may have difficulty coupled with three showings in the first four days suggests it may be a waste of time.

Check your agent’s logic

Some agents see a home sale contingency as an investment in their time that may go unrewarded if a second buyer appears, but if the market is hot, your home may sell first. There is also a feeling among agents that a home with an accepted home-sale contingency discourages other buyers from looking, but my experience suggests this is not universally the case. It all depends on the circumstances.

Questions to consider

1. What if I decide to sell and rent a temporary living space? You can hold out for the top price, avoid the risk of owning two homes and have time to look at the entire market. A double move is often less expensive than other options.

2. Sell with a long occupancy clause? You cannot hold out for the top price on your home, avoid limiting the number of buyers or avoid restricting your choices and time to look. You can avoid the risk of owning two homes, avoid being bumped, and know what you have to invest in the new house.

3. What if we buy and hope our home sells quickly? You cannot hold out for the top price, avoid the risk of owning two houses, and know what your proceeds from the old home will be. You can avoid limiting the number of buyers, avoid a double move, avoid being bumped, avoid limiting your choices and time to look, and negotiate the best possible terms and price on the new home. 

4. Sell with a contingency of finding a new home? You cannot avoid limiting the number of buyers on the old house or avoid restricting your choices and time to look. You can negotiate the best possible terms and price on the new home, buy knowing what your proceeds will be, avoid being bumped by another buyer, and avoid the risk of owning two homes. 

5. Enter into a guaranteed sale agreement? You cannot hold out for the best possible price on your old home. You can avoid the risk of owning two homes, avoid a double move, avoid being bumped, avoid limiting your choices and time to look, and buy a new home knowing what your proceeds will be.

6. Buy a new home contingent on the sale of our old home? You cannot hold out for the top price of your old home, avoid being bumped by another buyer, negotiate for the best price on the new house, or buy the new home knowing what your proceeds will be. You can avoid limiting your choices and time to look, avoid limiting the number of buyers for your old house, and the risk of owning two homes.

Which tactic to use depends on your finances and risk tolerance and a knowledgeable and efficient agent. A Dear Monty article at http://bit.ly/2prYsC5 contains additional information.

— Richard Montgomery is the author of "House Money - An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home." He is a real estate industry veteran who advocates industry reform and offers readers unbiased real estate advice. Find him at DearMonty.com.