Understanding Contingent Offers: A Seller’s Guide

With the market shifting toward balance between buyers & sellers, “contingent” is a word sellers will be seeing more of. It’s important to understand the difference between a “contingent offer” and one with “contingencies.” Contingent offers allow the buyer time to sell their current home first before they complete the purchase. On the other hand, an offer with contingencies allows the buyer to cancel the contract with a full earnest money refund if the specified conditions aren’t met—often a satisfactory home inspection or the ability to obtain financing.

This may feel a bit like buyers want to have their cake and eat it too, but every homeowner can understand the desire to protect their investment before fully diving in. In a seller’s market, there are fewer homes available, which means buyers will do whatever they can to make their offer stand out. Because sellers have the leverage in these market conditions, you’ll often see buyers waiving their contingencies. Talk to your agent for more information about the local market conditions in which you’re selling.

Should I accept a contingent offer on my house?

Each home sale is different, and each seller has a unique story. What you’re looking for in an offer may be different from what someone else in your neighborhood is looking for when selling their home. It all depends on your circumstances, your timeline, your next steps, and your local market conditions. The extra stipulations in a contingent offer require the attention of an experienced real estate agent who can interpret what they mean for you as you head into negotiations.

• How to Negotiate as a Seller

How often do contingent offers fall through?

Contingent offers can fall through more often than non-contingent ones, but there’s no general rule of thumb. Whether a sellers and buyer are able to agree on the terms of a deal is a case-by-case situation. Different contingencies may carry different weight among certain sellers, and local market conditions usually play a significant role. For up-to-date information about your local market, visit our Market Reports page or Trends on our blog.

Pros and Cons of Contingent Offers for Sellers

Pros of Contingent Offers (allowing the buyer to sell their current home first):

• Accepting a contingent offer means you don’t have to take your home off the market quite yet, since the conditions of the deal haven’t been met. If the buyer backs out of the deal, you can sell without having to re-list.
• In certain cases, some buyers may be willing to pay extra to have their contingent offer met even if the home has been on the market for an extended period.

Pros of Offers with Contingencies (such as inspection, title, financing, etc.):

• You’ve got an offer! In a balanced market, one offer with contingencies is still better than no offers.
• It may protect you legally if you give the buyer the opportunity to do all of their due diligence while under contract. It’s harder for a buyer to come back and say something wasn’t disclosed when they had ample time and the contractual right to due diligence.

Cons:

• Home sales with any types of contingencies are usually slower than those without. It takes time to satisfy a buyer’s contingencies and additional time to communicate that they have been met.
• There’s a higher risk that the deal could fall through since the the buyer isn’t locked into the contract until of their contingencies have been satisfied.
  

It’s important to have an agent you can trust for guidance when facing contingent offers. Reach out to me any time—I’m never too busy to give advice or answer questions:

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This article originally appeared on the Windermere Blog, written by: Sandy Dodge.