In a house or apartment sale, you will always hear about the word “contingent”. But what is it? In real estate, contingent indicates that a seller has accepted a buyer’s offer. Including some specific requirements, in order to close the deal.
The most common contingencies are: inspection contingency, appraisal contingency, home sale contingency and financing contingency. We will explain them below:
Inspection contingency
This is an inspections buyers offer in order to protect their interest. This way, they can make sure everything is correct. In case there is something wrong, then buyers can use it as leverage to negotiate a better deal. If this happens, then you can agree to complete some repairs. But if both sides do not come to an agreement, they are free to walk away from the home sale.
Appraisal contingency
In this kind of contingency, the home appraisal has to be equal or higher than the buyer’s offer in order to close the deal. Why? It is simple. If the appraisal is too low and the buyer wants to negotiate an even lower price.
Home sale contingency
A home sale contingency means that a buyer will buy your house only when they sell their house. So, in this case you have no control over their sell, and so no control over yours.
Financing contingency
This contingency is also known as a mortgage contingency. This is usually done to protect both the home buyer and the seller.
Negotiating a contingent offer
Always negotiate in your terms in case you decide to accept an offer with a home sale contingency. Usually, you’re required to provide a notice to the buyer in order to give them a chance to lift the contingency. If they do not do so in time, you can terminate the agreement and start negotiations with a new buyer.
Contingent listing
This is the way a seller lets buyers know they have accepted their offer with contingencies. So, the home is in an active listing. This means that a seller can collect different offers with an active status. Until they find the perfect buyer to change the status from active listing to pending listing.
Pending listing
A pending listing status, depending on the state you are, can mean that you have accepted an offer and are still negotiating contingencies. It can also mean that you have accepted an offer and you just need to complete the paperwork in order to close the deal.
What happens to my listing status in case of accepting an offer with contingencies?
So, when you accept a contingency offer and you change status, it means that your house is no longer in an active listing, so your days on market will be over. However, you can still accept other offers from possible buyers, in case the current buyer backs up.
How can I protect my home sale from contingencies?
Well, the best way to avoid contingent offers is simple: you just have to sell your home to a cash buyer. Why? Because cash buyers are ready, but most importantly willing to pay, as fast as the same day without a lender. Another way is to sell your house off-market. When you sell your home off-market, you pass appraisals and buyer loan approvals. And skip directly to closing deals.
For any seller, a contingency equals risk. Because as a home seller, to see “contingent” in an offer can mean delays. This does not mean that they are not great, but it will be and uncertain process to go through during the sale.
Do you know how much to save up in order to buy a house? Check out this article and we will explain everything you need to know about it.
