What is a contingency?
A contingency is quite simply a condition or requirement that must be met in order for the sale to successfully close. If any such requirements are not met, the sale may fall through and the house would likely then remain on the market. In essence, a contingency is a safety net for the buyer or seller.
What are some common contingencies?
Perhaps the most common type of contingency a buyer might include in an offer is that a satisfactory home inspection be conducted on the property prior to close. Such a contingency is meant to protect the buyer from purchasing a home with a previously undiscovered problem. Other inspection contingencies might stipulate a separate inspection for the roof, a pool, a private well, asbestos or radon, or the presence of pests.
Another contingency that a buyer might also include a contingency in an offer that stipulates that the sale is contingent upon securing financing from a lender. Ideally, a prospective buyer will have a pretty strong indication from a lender in the form of a loan preapproval to back an offer and increase the likelihood that a sale will close, but financing may fall through even if a buyer has a preapproval letter in hand.
Another set of contingencies that are sometimes still seen are that the buyer will see the sale through only if his or her current home sells – or if the seller finds a new home to live in prior to closing the sale. These contingencies are designed to protect a buyer against carrying two mortgage loans or to ensure that the seller doesn’t find himself or herself without a place to live. Unfortunately, in this busy market, these contingencies are rarely accepted as both buyers and sellers want to know that they are moving forward without contingencies that cannot be predicted by the opposite party.
If a home on the market is listed as having a “contingency offer,” is it still available?
At present, no. A contingency offer has been accepted by a buyer. However, if the contingencies attached to the offer are not met, the sale can still fall through, in which case the house will likely return to the market. It’s generally best not to get too attached to the idea of buying a house that already has an offer on it.
It’s important to remember that your real estate agent is your best resource for understanding the terms of an offer or contract. Your agent can guide you through the process or placing or accepting an offer. His or her experience will help you make the most informed decision you can when negotiating a home sale.