When you’ve found the ideal house to make your home for the next few years, or perhaps a lifetime, it can be disheartening to hear that it’s not for sale anymore. While there are many reasons why a listed house is pulled off the market, the most common one is that a potential buyer has placed a contingent offer on the property.
Two-thirds of people looking for a home have already brought at least one property. It makes placing a contingent offer on a home safer for them because they can cancel their offer if something goes wrong.
If you’re wondering, can you make an offer on a contingent home? The short version answer is, yes, you can. Whether your offer gets accepted or not is dependent on several factors, including some components you can control.
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Types of Contingencies
A contingent offer is made by a buyer to the seller about their purchase offer for the property. If specific conditions are met before or during the purchase of the home, the contingencies have been met. In cases where the home falls short of the condition criteria, the buyer can demand their money back.
- Inspection Contingency is when a home inspector arrives at the property to properly inspect it. They will examine the exterior, interior, and structure of the home. If any damage or wear and tear are found, the buyer can go back to the seller to renegotiate the price.
- Appraisal Contingency determines the true value of the home. It can help the buyer determine whether the price that the seller has quoted is reasonable or too much for the property. After the appraisal, a fair value or estimate will be given to the buyer.
- A Home Sale or Purchase Contingency is when the offer for the home is dependent on whether the buyer can sell their old property first. In the situation that the buyer’s home remains on the market, the buyer can back out of the deal to buy the property from the home seller.
Not all contingencies are accepted by home sellers. If you are planning on placing an offer on a contingent home but have contingencies of your own to include, be aware that it can lead a seller to be less inclined towards selling their property to you.
What is a Contingent Offer in Real Estate?
More than 70% of closed home sales had purchase contingencies included in the final offer. Since contingent offers to let the buyer back out of the deal without any financial penalties, most house purchase offers today have specific contingencies attached to them.
A contingent offer means that a buyer has reached out to the seller and made an offer on the house. The offer has been considered by the seller and depending on whether all the contingencies have or will be met, they both agree to go through with the house transaction.
In cases where there is a purchase contingency, many sellers still choose to continue showing their homes to prospective buyers. It is because purchase contingent buyers can pull out of the transaction when their home remains unsold.
In these cases, you can swoop in and place your bid on the home knowing full well that someone else’s offer has been accepted. Many sellers choose to include a Kick-out clause in the purchase offer, which lets them inform the initial buyer that they’ve found someone else to sell their house to.
If you’re still wondering, can I still make an offer on a contingent home, you can, provided that you are prepared beforehand for your offer to be rejected. A contingent home provides no guarantee to backup buyers and you could be in for a loss of effort and time in case you don’t end up securing your contingent home.
Contingency Vs. Pending Offers for a Home
Contingent homes are usually still in the limbo status because:
- Inspections haven’t been conducted yet
- Buyer is unable to sell their home (for purchase contingencies)
- Buyer has not secured the appropriate financing for the home
While contingent offers on homes denote that the buyer and seller are under contractual obligation to go through with the deal unless one of them breaks a clause or contingency, pending offers are different in several ways:
- A home seller may receive multiple offers for their home and is currently reviewing and looking at all offers. At this point, they are willing to accept new offers too
- The seller may have accepted an offer already but is still showing the home to potential buyers due to specific loopholes that allow them to look for a better offer
- An offer has been accepted but the sale hasn’t closed within 4 months or more
Competition for Contingent Home
While the property you’re eyeing is on the market, chances are that the sellers will meet many buyers, some of them who end up placing high and attractive offers. Depending on what the demand for housing in the area is, a contingent home can have varying competition.
In general, since contingent homes are not listed with most real estate agents, you will have less competition and a higher likelihood of owning the home if the initial buyer pulls out.
Not all purchase contingencies end up making it to the closing date, so you can have hopes that you might still be able to own the home that you’ve found ideal for your requirements.
Chances of Getting a Contingent Home with an Attractive Offer
If you’re seeking for your home seller to back out on their previous offer with the purchase contingent buyer, you will have to place a highly attractive offer that they can’t say no to.
Placing an attractive offer doesn’t necessarily mean offering more money (but can be effective), it can also include paying a higher deposit upfront, not having a purchase contingency clause in your purchase offer, giving the seller flexibility for moving out, and so on.
You will have to pay the money deposit along with your offer even if it is on a contingent home. If your offer doesn’t go through, you will receive your deposit and option fee back.
When your seller finds the option too attractive, they can use the ‘kick-out’ clause to inform the initial buyer that the sale won’t be possible.
Keep in Touch with The Sellers
Maintaining constant contact with the sellers is imperative when you’re trying to close a contingent home. You may not be the only person interested in the home, and the sellers may not contact you in case their contingent offer falls through.
You can ensure that you are the first one to hear about the house being up for sale when you maintain constant communication and even form a personal bond with the sellers.
A personal pitch can also help the sellers understand why you desire their home and may lead them to change their decision to accept your offer.
Trust an Experienced Realtor
Getting a contingent home is no easy task, especially when all signs point to the contingency being fulfilled. You need to have an experienced realtor by your side constantly updating you on the process and likelihood of whether you will be getting the home or not.
Realtors can also help you find other contingency homes that may be fit to your tastes. The best way to get a purchase offer accepted by the seller is having little to no contingencies included.
Buying a home without contingencies can be a gamble for the buyer, and if you have a home that needs to be sold off before you close on another home, you may want to talk with real estate buyers beforehand who can buy your home without any contingencies or inspections conducted beforehand.
Plan out financing and any other factors that can help you minimize your risk and financial loss in case you place an offer without any contingencies on a contingent home.
A House Is Always Up for Sale Until Closing Date
Since contingency clauses are meant to protect the buyer rather than the seller, you might be able to intercept a contingency offer to get the house. Many purchase offers that have been agreed to by the seller may have contractual obligations between the two parties that cannot always be easily broken.
Sellers can always accept backup offers on their contingent home regardless of whether they’re contractually bound or not. If their initial deal falls through, the first backup can be contacted to go through with the buying process.
Technically, most contingent listings are still ‘active’ until the required conditions have been fulfilled and a closing date has been decided. Once the home becomes listed as Pending, your chances of getting the contingent home become drastically low.
Most purchase contingencies have a time limit that is determined under the ‘kick-out’ clause. Once the time has elapsed, the house becomes listed as active because the old deal has fallen through.
Ensure that you’re placing an offer on your dream home even if it is in its contingent. If the initial buyer backs out for any reason, it will increase your chances of getting the home.
Need to Offload Your Home Quickly?
Time waits for no one, and when you are placing an offer on a contingent home, you may need to sell your current home quickly if your offer becomes accepted. Depending on your neighborhood and house, selling your house could take weeks, or even months. When you need instant cash for your home with no hassle, trust iBuyer to come to your rescue.
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