Although just because a home is "contingent" doesn't mean you don't have a chance to buy the home. Let's discuss what contingent really means and what your options are when you find a contingent home you love.
You should never throw in the towel when you see a home online marked as contingent. Make sure you speak to your real estate agent and get their guidance.
Your buyer's agent can reach out to the listing agent to get their feelings on whether there is any chance the sale will fall apart. One of the many things a buyer's agent does will be to keep you updated on a properties status you may be interested in.
What Does Contingent Mean?
When the status of a home is marked contingent it means the seller has accepted an offer. However, there are contingencies that need to be met before the property can be sold. If these contingencies are not met within the contracted due dates there's a possibility the home may come back onto the market.
What are Common Contingencies?
Three of the most common types of real estate contingencies are a home inspection, appraisal and finance contingency.
A home inspection contingency provides the buyer a certain number of days to perform a home inspection.
Depending on the contract the buyer may be able to cancel the contract for any reason within this period. So if something major was discovered during the home inspection the buyer won't be stuck with a lemon.
On the flip side, if the findings aren't a dealbreaker for the buyer they can always try to renegotiate with the seller to see if they'll provide a credit or fix the items.
An appraisal contingency is another popular contingency. If a buyer is obtaining financing the home must appraise for the contracted price. If the home appraises below the contracted price the buyer can cancel the contract using the appraisal contingency. However, just because an appraisal comes in low doesn't mean the deal is dead.
There are three other options besides canceling the contract. One, the seller can reduce the contracted price to the appraised price. Two, the buyer can come up with the difference. Three, the seller and buyer can meet somewhere in the middle.
Now, if the buyer is paying cash and the home doesn't appraise they can move forward, see if the seller will reduce the price or cancel the contract altogether.
One of the longest contingencies is a finance contingency, which on average is 21-45 days. If the buyer is denied for financing within this period they can cancel the contract and walk away with their earnest money. Obviously, something nobody involved in the transaction wants.
Even if it's the day of closing the buyer can get their entire escrow deposit back. This is why it's so important for sellers to pay attention to contingency periods. They also need to know where the buyer is at in the financing process, are they pre-approved or pre-qualified?
Can I Buy a Home That's Contingent?
Possibly! When a real estate contract has contingencies there is always a chance the home may come back on the market. So the first recommendation is to submit a back-up offer. If the seller accepts your back-up offer and their current buyer doesn't meet their contingencies or waives them they can cancel that contract and move forward with yours.
Now, not all sellers are open to accepting a back-up offer, so the next best thing is to have your agent keep in constant contact with the listing agent. By doing so you'll be one of the first to know if the deal falls apart. There is no guarantee the seller won't put the house back on the market and receive multiple offers, but it at least gives you an opportunity to submit an offer.
Best case scenario you submit a strong offer prior to the home going "active" again and the seller accepts it.
Final Thoughts on Buying Contingent Homes
When a home is under contract but it has contingencies there is always a chance the deal can fall apart, so it doesn't hurt to pursue the purchase. With that being said you shouldn't put your home search on hold to wait and see. You should continue to look at homes that meet your needs, but always keep the contingent home on your radar.
Additional Resources about Buying a Home
Contingent Vs Pending homes, there is a big difference between the two. One has contingencies and the other has none. However, just because a home is contingent or pending doesn't mean it's a done deal, I've seen both come back onto the market. So if you're looking to buy a home and it's contingent or pending don't be afraid to ask your agent to find out more details about the current status.
Buying a home isn't always easy or fun especially for first-time homebuyers. This is one of the many reasons it's important to hire a Top Realtor, they will be able to guide you through the entire process whether you're a first-time homebuyer or a 5th-time homebuyer.
About the Author: Top Wellington Realtor, Michelle Gibson, wrote: “Can I Buy a Home That's Contingent? ”
Michelle has been specializing in residential real estate since 2001 throughout Wellington Florida and the surrounding area. Whether you’re looking to buy, sell or rent she will guide you through the entire real estate transaction.
If you’re ready to put Michelle’s knowledge and expertise to work for you call or e-mail her today. Areas of service include Wellington, Lake Worth, Royal Palm Beach, Boynton Beach, West Palm Beach, Loxahatchee, Greenacres and more.