Understanding Contingencies and What They Mean

13 Flares Filament.io 13 Flares ×

When you are in the market for buying a home, you have a tide of emotions along with wants and needs, logic and fancy, dreams and realities, all combating for attention as you navigate these exciting and difficult waters.  In the process, you may have encountered a home that appears to be just what you have wanted to find.  It has all the features you want, it has an attractive price, a good neighborhood; everything that says you should make an offer.

Just one question: it shows the listing as “contingent” or “contingent offer.”  You are suddenly presented with the need of understanding contingencies and what they mean.

A tour in the dictionary will give you a basic definition of “contingency:” something that is subject to change.  But in terms of real estate, that has some very specific implications and there are several.  They all imply that a prior offer for the home is being entertained, but that does not mean that the sale is a sure event.  There are several conditions that may preclude finalizing a deal with the initial buyer; you may still have an opportunity to buy the home.

Whatever the contingency may be, the listing agent will know the details and be able to advise you or your buying agent on how to proceed.

The contingency may be simply that an inspection still needs to be performed on the home.  The initial offering buyer may not have time to wait for completion of the inspection, in which case, the home would be re-listed without the contingency once the first buyer backs out from the offer.

Following the previous theme, if the inspection is completed and reveals something disagreeable to the initial buyer’s offer, they may retract the offer and the contingency notice would be removed.  Or if there is something wrong with the home that will require repair to meet code or to accommodate expected living conditions, you must carefully consider gauging your willingness to fund the repair if the current homeowner cannot make those repairs, or make an offer on the home as is.  This may be advantageous by enabling a lower offer considering the inspection results.

The initial offer may have included an offer for appliances or patio furniture that the seller had not originally considered as part of the sale and they must consider the offer before making a decision to accept it.  They may choose to make a counter-offer if they are not willing to sell the added items.

Perhaps the initial offer was made before the hopeful buyer qualified for a loan and that buyer finds they cannot secure a loan.  Therefore, the original offer fails and the home is available without contingency.

It is possible that the initial offer carried a contingency that the buyer’s current home needs to sell before they can purchase the home in question.  The seller may make a counter-offer to allow other bids to be entertained during the interim.  A secondary offer may accelerate either the first buyer’s incentive to find other means to close the sale, or relinquish the offer.

And finally, the seller’s circumstances may have changed after receiving a first offer and they decide to remove the listing and remain in the home.

There may be other contingent factors that affect proceeding with the acceptance of an initial offer, but these listed above are the most typical encountered in the real estate market.  For all the above contingency examples, there is a possibility that a home seller and agent would be willing to accept secondary offers even under contingency.

Every example above carries circumstances that may cause the contingency to overwhelm closing the sale to the original offer.  This is why it is always wise to investigate the specific cause of the contingency by calling the listing agent.  While not an option in every case, the listing agent may indicate a willingness by the seller to entertain secondary offers for the home during the contingency, even in the case of deciding not to sell the home after all.

If you are the first to make a secondary offer, and you are not deterred by the contingency factor(s), your offer becomes the next in line to entertain should the first buyer’s offer be removed for whatever reason.

Contingencies complicate a home sale, but by aggressive pursuit of the cause, and willingness to negotiate their impact, your opportunity to purchase a home with an existing contingency may be just the ticket to fulfilling your home buying dreams.

Looking to buy or refinance a home? Inzopa can help save you time and money.

Sign Up For Free

13 Flares Twitter 0 Facebook 5 LinkedIn 3 Google+ 5 StumbleUpon 0 Email -- Filament.io 13 Flares ×