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What Does Contingent Mean in Real Estate?

Written By: The Orchard Team

April 2, 2019

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.

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So 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:

1. Financing: This is the most common contingency you’ll see. A financing 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.

2. Home sale: This contingency lets existing homeowners make an offer on a new home that is contingent on selling their old home. This condition helps homeowners avoid the risk of overlapping housing payments and maximize their chance of getting approved for a new mortgage.

3. Appraisal: If the appraised value of the home is lower than the purchase price, this contingency allows buyers to renegotiate the purchase price or walk away. This requirement is important because a buyer’s mortgage lender will not lend them more than a home is worth.

4. Inspection: This contingency gives buyers the right to have the home inspected by a professional before completing the sale. If the home inspector finds any issues, the buyer can request that the seller fixes it, or they can cancel the contract.

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.

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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:

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