More home sales hinge on 'I'll buy if I can sell'
Contingencies up as market slows
A slowdown in home sales is forcing prospective home buyers to put a condition on their offers for residences in Boston's suburbs: I'll buy your house only if I can sell mine.
Homeowners trying to trade up to a bigger house or a community with better schools, or empty-nesters attempting to sell their big family home before moving into a downtown condominium, increasingly are adding a contingency to their offer to buy a new home specifying it can be withdrawn if the buyer cannot sell his or her own house.
Coldwell Banker Residential Brokerage estimated clients are receiving up to 15 percent more of these conditional bids than last year. Agents with Re/Max of New England described some situations in which there are two to four related house closings in a single day, with each transaction hinging on successful completion of the one before it.
''The market is slowing, properties are on the market longer," said Charles Lemire, Re/Max regional director. ''That creates the necessity of contingency sales."
When houses sell more quickly, homeowners often see no need for contingency clauses. No data exist to track this trend. But since January in Massachusetts, 8,385 houses have gone back on the market after a deal to sell unravels -- 900 more than the same period last year, Jan. 1 through Sept. 12, according to MLS Property Information Network.
Massachusetts home sales, which hit a record in 2004, are declining. The slowdown has had no effect yet on the median price of a house, $375,000, up 7 percent since July 2004. But real estate analysts and agents said contingency offers are part of a broader trend in which sellers in a softening market are not facing up to the fact their house is worth less than they had hoped and therefore are reluctant to lower the price in order to complete a sale.
One way some buyers can deal with a slowing market is by obtaining so-called bridge loans, which allow buyers to finance two homes -- the one they are selling and the one they are buying -- temporarily. Eastern Bank said it has made at least 10 percent more of those loans this year than last.
The housing market slows down when prices do not fall in response to more houses on the market, said Karl Case, professor of economics at Wellesley College. He predicted ''fewer transactions" and ''downward pressure on prices" in coming months, though he does not foresee a dramatic drop in prices while the economy remains strong.
Paul and Rebecca Coronite have been anxious to sell their tidy Norwell home on a dead-end street, since finding a bigger one in Plymouth. Their home is bursting with three children under age 3, but their offer for the Plymouth house is contingent on selling theirs. Paul Coronite, a police officer, said he cannot afford two mortgages.
The Plymouth seller, whom the Coronites did not want to identify, agreed to the contingency but asked for their own: a ''kick-out clause," permitting them to continue showing their house to other prospective buyers. If the Plymouth homeowners receive another offer, the Coronites have 48 hours to commit to purchasing their dream house without selling theirs first, or forgo it.
Norwell schools are well regarded, and Rebecca Coronite is puzzled as to why her house is not selling: There are just ''a handful of homes in Norwell under $400,000," she said. The couple dropped their asking price from $409,900 to $349,999, despite having installed a new kitchen, central heating and cooling, a septic system, and fresh paint. But they face stiff competition in a neighborhood strewn with For Sale signs.
After weeks without any offers, they received one this week, with a familiar catch: It is contingent on whether the prospective buyers can sell their home. The Coronites are considering the offer, and ''keeping our fingers crossed nobody wants to buy" the Plymouth house, she said.
Massachusetts condominium sales, meanwhile, continue at a rapid clip. One source of demand is aging baby boomers selling their family home after the children go to college and purchasing a condo. If it becomes more difficult for them to sell, condo sales may cool, said Barry Nystedt, owner of Buyer Brokerage Realty in Newton. In some condo markets, he sees early signs of that, ''and it might be because people aren't selling the houses."
Condo buyers such as empty-nesters with substantial assets are less likely to make contingency offers because they have the financial resources to carry more than one mortgage temporarily.
Agents said summers are slow and things improve as the post-Labor Day selling season kicks in. But with the number of single-family homes on the market at record levels in the Boston area, most agreed the market is in transition. Contingencies, while not new, are making a comeback. ''Two years ago, a seller wouldn't take an offer if it was contingent on the sale of another house because the market was so hot," said Jess Aptowitz, a Re/Max agent in Foxborough. Today, sellers ''think their house is the Taj Mahal, and they're overpricing. That's part of the problem."
A Coldwell Banker executive vice president, Mark Lippolt, said bids with conditions on them are often rejected by sellers, who do not want to tie themselves down indefinitely. ''It has to be an unusual seller who has the ability to wait that out," he said.
Marvin Kushner, a real estate attorney in Wellesley, said he has not seen contingencies on closings. He ''recommends against it unless someone was in a really dire situation to sell," he said. ''It's like a house of cards."
That was a risk Re/Max agent Anne Galvin took when she helped coordinate four closings in a single day, June 15: At 8:30 a.m., Jeffrey and Michelle Clough sold their Dorchester condo. At 11:30, the Cloughs purchased a Dorchester single-family from Brian and Brandy Purcell, completing a deal the Cloughs had made contingent on selling their condo.
At 1:30 p.m., the Purcells purchased a Milton home; the Purcells' offer was contingent on selling to the Cloughs. Then, at 2:30, the seller of the Milton home, purchased a condo.
Boston's high house prices only fuel these complex offers: Brian Purcell agreed to the Cloughs' contingent bid of $389,000, because it met his bottom-line price necessary to afford $505,000 for the Milton house. Though the deals closed like clockwork, participants would not recommend it.
''It was nerve-racking," Michelle Clough said.
Looking back, Brian Purcell said, ''It's amazing that everything went smoothly."
Kimberly Blanton can be reached at blanton@globe.com. 