As you start your home search journey, you may encounter some homes labeled “Contingent.” You might be thinking: What does this mean? This home is perfect, but is it even available? Here’s what a contingent status means and how it may impact your search.
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 penalty. Buying a home can be a complex process, so it’s nice to know that, as a buyer, you have a certain level of protection if anything doesn’t go as planned.
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.
Common Contingencies
Financing Contingency:
The financing contingency is a clause that gives the buyer a limited number of days to secure financing for the home they are interested in. If financing can’t be obtained, the buyer is protected.
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. If results of the inspection aren’t favorable, the buyer can decline moving forward on the purchase or require repairs before closing.
Appraisal Contingency:
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 relies 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.
Real estate lingo can be challenging to comprehend, but hopefully this information will take some of the guesswork out of the process as you continue your search. Be sure to connect with one of more than 9,000 agents today to help you understand terms like these and navigate the market successfully. Ready to buy but not sure what you can afford? Check out the mortgage calculator to help estimate possible monthly payments. Download the REIN.com app and put the power of fresh and accurate listing data in the palm of your hand. The app is available free in the Apple App Store and Google Play Store. For local listings you can trust, start with REIN.com.
Local Home Listings You Can Trust.
