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If you’re buying or selling your home for the first time, there’s quite a bit of new lingo you’ll hear along the way. One real estate term you may come across is “contingent.” A contingency in your purchase contract could determine whether your real estate transaction is seamless or stressful, so let’s go over exactly what it is.
What does contingent mean in real estate?
If a home buyer makes a contingent offer, that means the home sale will only go through if certain conditions are met. That way, if something goes wrong during the sale, the buyer can back out without losing their earnest money deposit. There are a few types of contingencies in real estate, including:
A financing contingency, also known as a loan contingency, means that if the buyer has trouble getting a mortgage for the home purchase, they can drop out of the contract with no penalty.
Home sale contingency
A home sale contingency lets existing homeowners make an offer on a new home that’s contingent on selling their old house. That way, they can avoid overlapping housing costs.
An inspection contingency gives buyers the ability to negotiate repairs or cancel the contract based on the results of a home inspection.
An appraisal contingency states that if the appraised value of the home is lower than the purchase price, the buyer can negotiate the purchase price or walk away at no cost.
Can you put an offer on a house that is contingent?
During your house hunt, you might see a home listing marked as “contingent,” which means the seller has already accepted an offer, but the sale isn’t final yet because of contingencies in the contract. In this case, there may still be an opportunity to make an offer on the home. On the other hand, a “pending” status means that any contingencies have been met, and the sale is expected to go through with the current buyer.
Can you avoid real estate contingencies?
Buying a home is typically the biggest purchase someone will ever make, and contingencies help buyers ensure that their investment is secure. However, if you’re a buyer looking to make a competitive offer, contingencies could hold you back. That’s because sellers usually prefer contingent-free bids that give them more certainty. Some buyers in hot markets choose to waive contingencies in their bid, but most of us can’t afford to take this risk.
For sellers, a contingent contract means that there’s always a chance that the sale could fall through, in which case the seller would have to go through the whole selling process again. Contingencies can also mean time-consuming appraisals, inspections, etc., which could cause delays in the closing process.
So is it possible for buyers and sellers to avoid contingencies? If you work with Orchard, you can get many of the benefits of a non-contingent contract. For homeowners looking to buy their next home, we guarantee that your current home will sell within 120 days. That way, you can make a competitive offer without a home sale contingency on your new home without the risk.
For those looking just to sell, we’ll give you a cash offer on your home, so there’s no chance of the sale falling through due to financing contingencies. That peace of mind can help you shop for your next home without worrying about selling your current one. Interested in learning more about Orchard? Start by finding out how much your home is worth here.