Contingencies are a common occurrence in real estate transactions. They simply mean the sale and purchase of a house will only happen if certain conditions are met. The offer is made and accepted, but either party can bow out if those conditions aren’t satisfied. Most people think of contingencies as being tied to financial concerns. A buyer can make an offer, but it is contingent upon them obtaining a mortgage. Actually, there are at least six common contingencies and financial contingencies aren’t the most prevalent.
Home Inspection Contingency
Buyer makes their offer with the stipulation that it is only valid if the independent inspection report
Appraisal Contingency
In an appraisal contingency, the buyer makes their offer, the seller accepts it, but the deal is contingent upon the lender appraisal. If the buyer is seeking financing from a lender, the lender will require an appraisal of the property to ensure the asking price is in line with the actual assessed value of the home
Mortgage/Financing Contingency
According to the National Association of Realtors (NAR) survey mentions 44 percent of closed home sales included a financing contingency. A financing contingency is when the buyer makes an offer, the seller accepts, but the sale is contingent on the buyer obtaining financing from a lender.
Home Sale Contingency
Most buyers face a similar dilemma: they must sell their current home before they can afford to buy their next home. In these situations, the buyer will make their offer on the new home with the contingency that they must sell their existing home first.
Title Contingency
In some circumstances, the title company will discover problems with the property’s record of ownership. It may be that there is an unsettled lien from a previous owner or judgment on the property if there was a divorce or unpaid taxes, for instance.
Contingencies are quite common however, they can cause an offer to be weaker than a non-contingent offer. As any home seller will tell you, a clean, non-contingent offer is attractive and often favored over contingent ones. The home sale process moves much more smoothly and quickly without these contingencies tied to them. Fewer roadblocks mean less stress for both the buyer and the seller.
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