What Does “Contingent” Mean In Real Estate?
No matter if you’re looking to buy or sell a house, being educated in the process is important. And at Team French, we are passionate about helping those in the process understand and feel informed. Perhaps you’ve seen signs or at least heard of the real estate term contingent. So, what does “contingent” mean in real estate? It means that a deal has been reached between the buyer and seller but with certain stipulations that must occur. This is not an uncommon occurrence in reality. Here are a few to consider with contingent status.
What’s the Purpose of Contingent Status?
First of all, what is the purpose of contingency? Well, the main reason is to protect the buyer. Depending on the reasons for contingency, it usually protects the buyer from losing money or purchasing a home with problems by giving them time to fully investigate the condition of the property and the added costs of owning the home.
Common Reasons for Contingent
Before going too deep in the buying process, a buyer must typically get pre-approval for a mortgage from a lender. A loan contingency protects the buyer from losing money if the lender is not able to complete the loan for any reason and the buyer is no longer able to purchase the home.
An appraisal contingency is based on the cost of the house compared to the determined value. Usually, a real estate appraiser visits the house and determines its value. If the value is appraised at less than the agreed-upon purchase price, the lender will not want to pay it. This contingency allows the buyer to back out if this happens however most buyers and sellers will try and renegotiate.
For an inspection contingency, typically the buyer pays to have their own inspector analyze the home. If the inspector finds things the buyer wants to be repaired or changed before purchasing, the buyer can try and negotiate some of those repairs or even walk away from the deal.
Contingency on Selling Your Current Home
Before buying a new home, many people want or need to sell their current home. This contingency allows a buyer to make an offer on a new home before accepting an offer on their current one.
Should the Buyer Always Have Contingencies?
Contingencies sound great for the buyer. After all, they’re meant to protect the buyer from losing money. But there may be times when the buyer doesn’t include contingencies in an offer.
In housing markets where houses are moving quickly and receive multiple offers at a time, an offer that includes contingencies could deter a seller from accepting it and make your offer less competitive when you are competing with multiple offers. Discuss contingencies and your offer with your real estate agent before making an offer. They are an important negotiating term.
Can You Still Make An Offer Even if a House is Contingent?
Yes! If the house is not listed as sold then you can make an offer. Your agent can help you find out about a contingent home, why it’s in contingent status, and possibly even the stipulations.
Contingencies If You’re the Seller
If you are the seller of a home, you may very well get offers with contingencies. While you should consider all offers, remember you don’t have to accept all contingencies. Together with your real estate agent, consider the stipulations, the current market, and what you’re willing to consider.
No matter if you’re in the market to buy a new house or sell your current one, Team French would love to help. We can help you navigate the complexities of real estate such as the meaning of “contingent”. Contact us today!