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A contingent offer is an offer on a house that isn’t fulfilled until certain conditions are met, usually for the buyer’s protection. The buyer and seller decide how long a contingent offer can last, and what they’re dependent on — like the appraisal price, financing, and the sale of a current home. Since contingent offers aren’t final, it’s possible that the home sale will fall through.

Here’s everything you need to know about contingent offers, whether you’re buying or selling a home.

The meaning of a contingent offer

When a buyer makes a contingent offer, that means their offer to purchase the house is only valid if certain conditions are met. A contingent offer allows homebuyers to back out of the purchase contract without losing their earnest money deposit.

Buying a home is typically the largest purchase someone will ever make, and having contingencies help buyers ensure that their investment is safe and sound. However, if you’re a buyer in a competitive market, a contingent offer could hold you back. That’s because sellers may be reluctant to accept a contingent offer since there’s a chance that the sale will fall through.

Types of contingencies and contingent offers

A house may be contingent based on any of the following:

Loan contingency

This is the most common contingent offer you’ll see. If the buyer has trouble getting a mortgage for their home purchase, they can drop out of the contract without penalty. That way, buyers can avoid getting too deep into a real estate transaction without having the money to back it up.

Home sale contingency

A home sale contingency means that the offer is dependent on the sale of the buyer’s current home. This condition helps homeowners avoid the burden of making payments for both their new and existing home at the same time.

Appraisal contingency

If the appraised value of the house comes back significantly lower than the sale price, the buyer may have trouble securing a mortgage that’s large enough to buy the house.If the buyer doesn’t have additional cash on hand to cover the difference, the buyer and seller can negotiate the purchase price to match the appraised value. If this doesn’t work out, an appraisal contingency will allow the buyer to break the purchase agreement without forfeiting their deposit.

Learn more about appraisal contingencies.

Inspection contingency

This contingency gives buyers the right to a home inspection before completing the sale. The goal of the home inspection is to identify any issues that could cause trouble for the potential buyer, who can can cancel the purchase contract altogether if the situation can't be remedied.

How long does a house stay in contingent status?

A home will remain contingent for a specified period of time until the buyer fulfills the conditions and proceeds with the sale — or they don’t, and the sale falls through. Contingencies can last anywhere from 30 to 90 days. How long a contingent offer is good for ultimately depends on the purchase agreement signed between the buyer and seller. 

The contract will contain any details about contingencies, if the buyer chose to have them, including whether or not the listing agent will continue to show the house during this time. If there’s a kick-out clause, then the seller can keep meeting potential buyers while the house is in contingent status in case someone comes through with a better, non-contingent offer.

Find out how often a home sale falls through.

Can I make an offer on a contingent home?

When a home has a contingent offer, the sale isn’t final so it can be worth a shot to put in an offer. (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.) The worst thing that can happen is that your offer is rejected. If the seller does accept your offer, be prepared to move quickly, since the seller might be motivated and ready to finalize the transaction.  

You can beat out a contingent offer by making a higher offer, or making an offer in cash — cash offers free up contingencies, which are enticing to the seller, and give you more negotiating power.

If someone has already made an offer on your dream home, but you’re still interested in buying it, let your agent know. They can talk with the listing agent to get more information about the status of the contingent offer, and whether to get your hopes up about the seller reviewing yours. 

If you’re looking for your next home, Orchard can help — We can even help turn you into a cash buyer so you don’t have to make a contingent offer. 

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