Everything You Need to Know About Real Estate Offer Contingencies
September 22, 2020
Real Estate deals usually always come with contingencies whether you are the buyer or the seller. Real Estate contingencies are the reason why traditionally buying or selling a house takes months. Usually when a real estate deal falls through it is because a certain contingency on either the buyer or the seller's side is not met. So, if you are in the market for buying a house or you want to sell your house, read onward! In this article, we will explore:
What real estate contingencies are
Overview the most common contingencies
What the affects a contingency has on the sale
Share tips on how to navigate buyer and seller contingencies
What is a Real Estate Offer Contingency?
A contingent offer is an offer with certain conditions, and if they are not met, the buyer can cancel with no repercussions.
The 3 Most Common Contingencies
Traditional real estate transactions nearly always have three contingencies that are accepted as "normal": an inspection contingency, an appraisal contingency, and a financing contingency.
The inspection contingency allows the buyer a certain period of time to conduct inspections and allows the buyer to cancel for any reason within that specified time frame.
An appraisal contingency allows the buyer to cancel if the property does not appraise for the amount of the purchase price.
The financing contingency stipulates that the buyer is to qualify for a certain type of loan or else they can cancel.
Out of these 3 what is the most common?
Unless one is selling to a professional home buyer, it is rare to see a purchase contract that does not contain an inspection contingency. One common misconception is that an "as-is" offer means there is no inspection contingency - but these are two separate issues. A buyer can make an "as-is" offer, which means they will not ask for repairs, but still have an inspection contingency so that they can verify the condition of the home and cancel if it does not meet their expectations.
The Cash Offer
Let´s explore why cash offers made by buyers are so appealing. The reason a "cash offer" is appealing to many sellers is that a cash buyer will generally not require an appraisal or financing contingency - which can allow for a faster close since the appraisal and lender approval are the two most time-consuming aspects of a sale.
So if you are offered cash on your home and you want to sell it fast this is an easy way to bypass the time-consuming appraisal and financing contingencies.
The Most Difficult Contingency of them all
The 4th most common contingency is a buyer contingency based on the sale of their other home. In a "hot" market or a "Seller's market," this contingency can make it very difficult for an offer to be accepted as the entire transaction is dependent on the sale of another property. This is a good contingency for the buyer since it is safer for them to sell their other home first before buying another. But for the seller, this contingency can be the most painful experience especially if they want to sell their home fast.
Tips for both the seller and buyer when facing this Contingency
Any seller considering accepting a buyer contingency based should invest the time to contact the agent representing the other sale as well as the lender handling the buyer's financing to inquire as to the status of the inspection, the appraisal, and the financing.
There are generally two ways for a buyer to alleviate seller concerns regarding a contingency:
First, try to shorten the contingency timeline as much as possible, the second and most powerful is to be willing to provide a substantial earnest deposit that is non-refundable. A non-refundable earnest deposit means that the seller will be able to retain those funds even if the contingencies fall through. However, it is rare for a buyer to provide a non-refundable earnest deposit unless they are a professional home buyer.
How to skip all of these contingencies by selling your house fast?
So by this point, we know what real estate contingencies are, what the most common contingencies are, and we learned some useful tips to navigate these contingencies. But what if you just want to sell your home fast and skip the months of wait time? What if you don´t want to have to make the home repairs in the inspection reports? Can you still sell your house?
Luckily we buy houses in Phoenix and all over Arizona. We are professional house buyers that can buy your house in 7 days with no fees and no fuss! Skip these real estate contingency hassles by selling your house to us! Contact us to get your free and fast cash offer.
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