While searching for your next home online, you might see properties you love but that are technically unavailable. The properties display as “Active-Contingent.” You might be unclear of what that means and, more importantly, what it means for that home you have your eye on. Here’s what you should know about contingencies as you navigate your home-buying journey.
What is a Contingency?
Contingencies are clauses listed in the standard purchase agreement of a real estate contract that must be met before closing on the home. If the items listed aren’t met, the buyer has the option to back out of the agreement without being penalized for their action. It provides a certain level of protection for buyers in the process of buying a home.
Just because you see a property listed as contingent doesn’t mean you should give up all hope of making it yours. If the contingency isn’t met by dates specified on the agreement, that home can make its way back to a completely active status and is fair game once again.
The financing contingency is a clause within the agreement that allows the buyer to obtain financing for a new home. It gives the buyer a limited number of days to secure a loan. If the buyer is unable to obtain the financing, this type of contingency will protect them from any penalties.
Home Inspection Contingency:
A home inspection offers a tremendous amount of protection to a buyer and shouldn’t be sacrificed just to win the home. It basically ensures you’re not buying a lemon. A home inspection should look at the foundation of the home, its structure, and any possible problem areas, etc. The results of this type of contingency will allow the buyer to decline moving forward on the purchase or require repairs before moving forward.
This type of contingency assesses the value of the home. The goal is to make sure the home isn’t valued lower than what you as the buyer are preparing to pay for it. If the appraisal price and the sale price don’t match up, this could present problems with the buyer’s lender. The buyer could be forced to either make up the difference on their own or back out of the sale.
Home Sale Contingency:
All buyers in the market aren’t first-time buyers with no attachments. Some buyers may be walking out of a home they currently own into a new one. This type of contingency states that the sale of the home the buyer wants is contingent on the sale of the buyer’s home they currently live in. This is particularly risky for the seller and puts most of the power in the buyer’s hands as to whether the purchase moves forward or not.
There are many real estate terms in the industry that can be overwhelming for buyers and sellers to grasp. Hopefully, this information will aid in your understanding of the process as you continue your search. Connect with one of our 8,000 agents today to help you navigate the market. To find out what you can afford, check out our mortgage calculator to help estimate your monthly payments. For local listings you can trust, start with REIN.com.
Local Home Listings You Can Trust.