What Is a Contingency Offer?
A contingency offer includes conditions that must be met before the sale of a home can proceed and/or close. Because these stipulations usually cater to buyers, a contingency offer may introduce uncertainty or risk for the seller. It’s important for both the buyer and seller to carefully consider the terms of any contingency offer. Both parties should work together to reach an agreement that satisfies both sides.
Types of Contingency Offers
Contingencies are typically meant to protect the buyer’s interests and ensure that they are comfortable moving forward with the home’s purchase. Common contingency offers include:
- Financial Contingency: The sale is contingent upon the buyer obtaining a mortgage or financing to purchase the property.
- Home Inspection Contingency: If the home inspection reveals significant issues, the buyer may have the option to request repairs, renegotiate price, or withdraw entirely.
- Appraisal Contingency: If the property doesn’t appraise at or above a certain value, the buyer may have the option to renegotiate the price.
- Sale of the Buyer’s Home: If a buyer needs to sell their current home in order to purchase a new one, they may make the new home’s purchase contingent on the sale of their current one.
Why Do Sellers Not Like Contingency Offers?
Oftentimes, sellers prefer not to accept contingency offers due to uncertainties in the sale process. Since contingency offers are conditional upon several factors, such as financing and inspections, they can delay or jeopardize the home’s sale. Sellers can worry that these stipulations could lead to a prolonged sale timeline or the sale not following through if conditions are not met. In the current competitive real estate market where multiple offers are common, sellers may opt for offers without contingencies as they tend to be less risky. While contingency offers usually provide protection for buyers, sellers can also benefit from contingency offers, including this common one:
- Home Sale Contingency: If a seller needs to find a new home before selling their current one, they can include a stipulation that their sale is contingent on securing a new home.
What Can Buyers Do About It?
If you’re a buyer and need to make a contingency offer, you can enhance the appeal with a few different strategic steps. First, if you’ve been following us for a while, you know that we strongly encourage obtaining a mortgage pre-approval. A pre-approval demonstrates financial readiness that can instill confidence in the seller. Additionally, flexibility in the timeline, a generous deposit, and a short contingency period can all speed up the process and be key selling points.
Final Thoughts
The acceptance or rejection of a contingency offer can vary depending on several factors, including the current real estate market, the seller’s motivation, and the transaction’s specific circumstances. If you plan to make a contingency offer, be sure to thoroughly discuss your terms with your real estate agent. You can work together to make your criteria as attractive as possible to the seller while still protecting your interests. Remember, being open to ideas and negotiation can increase the chances of having your contingency offer accepted.
© Mortgage Specialists.