When making the decision to sell your house there is no better feeling than accepting an offer and moving forward with the closing process, however, what happens if you accept a contingent offer? Contingent offers oftentimes go through to closing without a hiccup and there is no reason for worry, however, there are times where a buyer is able to back out of a sale should their contingencies not be fully met.
There are a few different types of contingent offers and understanding them is vital in deciding if you’d like to accept the offer or not. With the right seller’s agent by your side, should you receive a contingent offer, they will help navigate and guide you through what to expect, however, having a basic understanding of contingent offers is always recommend prior to beginning the selling process. A contingent offer is placed when a buyer wants to purchase the home, but has a contingency attached to their offer, and if that contingency is not met, they have the right to pull out of the sale. There are 4 common contingent offers, Inspection Contingencies, Mortgage Approval Contingencies, Home Sale Contingencies and Appraisal Contingencies.
Inspection Contingencies are the most common contingency you will see in the real estate market. This simply means that the buyer wants to purchase the house, however, they also want to ensure there is no serious damage or repairs that need to be made. Should they discover damages during inspections, the buyer can either ask the seller to fix the issues, settle upon an agreement for credits to cover the repair bills, or the buyer can choose to back out of the sale should the repairs needed be more than they’re comfortable with.
A Mortgage Contingency isn’t as common but does happen on occasion. This contingency simply states that if a buyer is unable to acquire the needed financing to purchase the home, then they are not obligated to complete the purchase and can back out of the sale.
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An Appraisal Contingency is another common offer. When an offer with this contingency is placed it protects the buyer from purchasing a home that is listed above the current market value. This protects buyers from purchasing a home that is over inflated or from a seller who may have a higher personal opinion on what their home may be worth. Should an appraisal show that the home is worth significantly less than the offer/asking price, the buyer can then ask for the price to be dropped to the appraisal findings, or can back out of the sale.
Finally, there is a Home Sale Contingency. If the seller accepts a Home Sale Contingency from a buyer, it basically means that the buyer wants to purchase the home but has to sell their current home in order to do so. Should an additional offer be received after accepting a home sale contingent offer, you, as the seller, will provide the buyer with a first right of refusal which gives the buyer the option to either move forward with the purchase or decide to back out.
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Understanding contingent offers may seem tricky, however, should you receive a contingent offer make sure to discuss it with your agent in depth to make sure you are fully aware of the contingencies and what they entail.