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Best Practice: Contingency

Revised December 9, 2008

Description

The Buyer who is ready, willing, and able can normally proceed with a Purchase Agreement with no contract terms other than a standard financing contingency. Occasionally a Buyer has a home to sell or some other event they wish to make the Purchase Agreement contingent upon. The understanding between the parties is that the Builder agrees to sell the home to the Buyer under all the terms of the contract, contingent upon the satisfaction of the contingency by a certain date agreed to in the Purchase Agreement.

The contingency date is documented in the agreement hard copy and allows the Buyer to void the agreement without further obligation during the time period identified in the contingency. The agreement displays a note regarding the contingency, the contingency date is visible to both Sales Rep and Sales manager, and it must be manually removed when the contingency either expires or is considered satisfied by the Buyer.

In the event the Buyer is unable to remove the contingency and cannot proceed with the contract, the Sales Manager elects to Terminate the contract, which returns the lot to it's previous sales status and deletes the Buyer's prospect record.

Contingency Best Practices 

Notes

If an agreement is accepted with a Contingency included, the lot will be removed from inventory as with any other contracted lot, with a sales status of Sold. Lots in a Sold status cannot be offered for sale to another prospect. If the Builder wants to continue to offer the lot for sale during the term of the contingency, BuildTopia recommends the following Best Practices for a lot offered for Sale, or For Sale and SPEC.

In all cases it is recommended the Builder ensure clarity between the parties by including language in the contingent contract specifying the steps the Builder will take until the contingency is removed from the agreement.

For Sale:

• The Sales Manager may elect not to accept the contract, but leave the agreement in the Submitted status, which reflects the contingency in red.
• A second option for the Sales Manager is to counter offer the agreement, which moves the agreement to the Sales Rep module, also reflecting the contingency in red.
• In both of these cases the lot can be sold to another prospect via the workup function during the term of the contingency.
• When the contingency expires or is removed by the Buyer, either the Sales Manager or Sales Rep is responsible to remove the contingency and accept the agreement per the Sales Contract Management workflow.

NOTE: Construction cannot be started on a lot in a Submitted or Counter Offer status.

For Sale and SPEC:

• The Sales Manager has the identical options described in the For Sale example above, but construction can commence or continue, based on the SPEC status of the lot.
• When the contingency is removed and the Submitted or Counter Offer status is changed to Accepted, the SPEC to PA process can proceed.

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