What Does Selling a House on Contingent Mean?
Contingencies may be frustrating, but they're an integral part of homebuying. If the property you're interested in requires contingent offers, there are ways you can prepare and position yourself as an attractive backup offer.
According to recent surveys, only about seven percent of offers fall through after being initially accepted, so listing contingently shouldn't increase your chance of having it rejected.
What is a contingency?
Contingencies are clauses included in real estate contracts that allow buyers to cancel the purchase if certain conditions aren't fulfilled, such as home inspection, financing, and title search.
What is a home inspection contingency?
Home inspection contingencies provide buyers with additional protection against incurring unexpectedly costly repairs or renovations that were not part of their initial purchase agreement. They also give buyers an opportunity to negotiate new terms if issues are discovered during inspections.
What is a financing contingency?
A financing contingency protects buyers by providing them with an opportunity to cancel the contract if they're unable to secure mortgage approval on time due to changes in financial circumstances such as taking on debt, losing jobs or changing professions, etc.
Since most mortgage lenders only lend to buyers with good credit ratings and history, buyers should ensure they possess strong scores as well as be ready to pay down existing debt before purchasing their new home.
What is a Title Search Contingency?
Title search contingencies provide buyers with an extra measure of protection during escrow closing to guarantee they will obtain a clear title to their property, eliminating the possibility of other people coming forward after completion of the sale and claiming ownership over part or all of it.
How do contingencies work?
Buyers typically include contingencies like home inspection contingencies, appraisal contingencies, and mortgage contingencies in their offers to protect themselves in case anything unexpected comes up that might require them to lose their earnest money deposit or secure financing.
Multiple contingencies can make an offer less appealing to sellers so only use them if needed and negotiate from a position of strength.
Home sale contingencies are another prevalent contingency, typically mandating that prospective buyers cannot purchase another property until their existing one has sold and met its conditions in the contract.
This typically allows original buyers a certain timeframe in which to fulfill those conditions; otherwise, sellers may consider other offers or put back onto the market the house in question. Your real estate agent can assist with understanding how this process works to best protect your interests.
Can I make an offer on a home that is contingent?
If you're a homebuyer and find an attractive contingent listing that you wish to make an offer on, speak to your real estate agent immediately about how best to approach making an offer on it. Usually, an initial prospective buyer is given an allotted period of time within which to remove their contingency; after which point the seller may consider other offers from interested parties or "kick out" without losing any earnest money they put down as earnest money on that deal.
As soon as possible, begin the mortgage approval process so that you'll be ready to submit an offer, contingencies included. Furthermore, consider waiving any home inspection or appraisal contingencies that might exist as this can make your offer stand out among others received and increase its likelihood of acceptance by sellers. However, this will cause you to lose important protections and if you are financing the home, these contingencies will likely be required by the lender.
There are many things to understand when it comes to contingencies, whether you are a home buyer or home seller It’s always best to defer to an expert local real estate agent who knows the market where you plan to buy or sell a home.