If you are buying or selling a home in 2023, you might encounter the term “contingent” in the listing status or the purchase contract. But what does contingent mean in real estate and how to deal with it? In this blog post, I will explain the meaning, types, and implications of contingent in real estate and provide you with some tips and strategies on how to deal with it.
What Does Contingent Mean in Real Estate?
Contingent means that a home sale is pending or conditional on the fulfillment of certain requirements or events. Contingent means that the buyer and the seller have agreed on the price and terms of the sale, but the sale is not final until the contingencies are met or waived. Contingencies are clauses or provisions that allow either party to back out of the contract without penalty if the conditions are not satisfied.
Contingencies are designed to protect the interests and rights of both the buyer and the seller. Contingencies can also help the buyer to secure financing, inspection, appraisal, or insurance for the home. Contingencies can also help the seller to ensure that the buyer is qualified, committed, and ready to close the deal.
What are the Types of Contingencies in Real Estate?
There are different types of contingencies in real estate, depending on the nature and scope of the requirements or events. Some of the common types of contingencies are:
- Financing contingency: This contingency allows the buyer to cancel the contract if they cannot obtain a mortgage loan within a specified period of time. This contingency protects the buyer from losing their earnest money deposit or being sued by the seller if they fail to secure financing.
- Inspection contingency: This contingency allows the buyer to cancel the contract or request repairs if they find any defects or issues with the home during a professional inspection. This contingency protects the buyer from buying a home that has hidden problems or damages.
- Appraisal contingency: This contingency allows the buyer to cancel the contract or renegotiate the price if the appraised value of the home is lower than the agreed-upon price. This contingency protects the buyer from overpaying for a home that is worth less than expected.
- Insurance contingency: This contingency allows the buyer to cancel the contract if they cannot obtain adequate homeowners insurance for the home within a specified period of time. This contingency protects the buyer from buying a home that is uninsurable or too expensive to insure.
- Sale contingency: This contingency allows the buyer to cancel the contract if they cannot sell their current home within a specified period of time. This contingency protects the buyer from being stuck with two mortgages or losing their earnest money deposit if they cannot sell their home.
- Home sale contingency: This contingency allows the seller to cancel the contract if they find another buyer who offers a better price or terms for their home within a specified period of time. This contingency protects the seller from losing out on a better deal or being locked into a contract with an uncertain buyer.
How to Deal with Contingent in Real Estate?
Dealing with contingent in real estate can be challenging and stressful for both buyers and sellers. Contingent can delay or derail a home sale, depending on how long it takes to meet or waive the contingencies. Contingent can also affect the bargaining power and leverage of both parties, depending on how many and how strong are the contingencies.
To deal with contingent in real estate, buyers and sellers need to be aware, prepared, and flexible. Here are some tips and strategies on how to deal with contingent in real estate:
- For buyers:
- Do your homework: Before you make an offer on a home, do your homework and research on the market, neighborhood, and property. You can use online tools such as [Zillow] or [Trulia] to find out information such as price history, comparable sales, property taxes, school ratings, or crime rates. You can also use online tools such as [Bing] or [Google] to search for reviews, ratings, or feedback on local agents, lenders, inspectors, appraisers, or insurers.
- Get pre-approved: Before you make an offer on a home, get pre-approved for a mortgage loan by a reputable lender. Getting pre-approved can help you determine your budget, interest rate, and loan terms. Getting pre-approved can also help you show your credibility, commitment, and readiness to buy a home.