Can you offer on a contingent house

Contingent is a specific status that means a home is under contract, and finalizing the sale depends on completing a few actions. These actions that can make or break the deal are called contingencies.

Before a house can have a contingent listing status, the homeowner must accept the prospective buyer’s offer, which will list the buyer’s contingencies for approval. Common contingencies include:

Contingencies protect buyers from some of the risks associated with buying a home. For instance, if the home inspector finds that significant roof repairs are needed, the buyer can use the home inspection contingency to end the deal without losing their earnest money deposit.

Keep in mind that sellers don’t like to receive an offer with a long list of conditions, especially in a competitive housing market. Instead, you should use contingencies sparingly and only when they make sense for your situation.

If you’re unsure which contingencies you should use, you can discuss your options with a real estate agent or REALTORⓇ. They’ll be able to help you write up your bid while making recommendations on crafting a more competitive offer.

Appraisal Contingencies

An appraisal contingency is common in real estate contracts and allows a home buyer to back out of a deal if the home’s appraisal returns at a lower value than the agreed-upon purchase price.

If an appraisal identifies a lower value, the lender may lower the loan approval or choose to deny the loan. Buyers can appeal for a second appraisal if they think the home is more valuable than originally appraised for, or negotiate a lower sale price with the seller if they still want to buy the home.

Finance Contingencies

Most home buyers finance their property purchase, and mortgage approval isn’t finalized until a few days before closing day. This contingency is a safety net in case a lender doesn’t approve the final mortgage, at which point the buyer can back out of the deal without major penalties.

A lender may decide to reject mortgage approval for any number of reasons, including a low home appraisal or if the buyer’s financial situation has changed since preapproval.

Home Inspection Contingency

No matter how beautiful your dream home is, there can be any number of needed repairs or hidden damage behind drywall or running under the floorboards. Imagine spending hundreds of thousands of dollars on a home, only to move in and find that the roof leaks when it rains and has caused expensive structural damage.

Home inspection contingencies protect home buyers from similar situations by requiring that the home pass professional inspection before the contract can settle. If a home inspector identifies major renovations or repairs, the home buyer can walk away from the purchase, ask for a lower price or negotiate the seller’s responsibility to complete the repairs.

Home Sale Contingency

Buying a home while preparing to sell your current residence can be complicated, so a home sale contingency aims to prevent buyers from paying on two mortgages at once. This clause allows a buyer to end a purchase if their current home doesn’t sell by a specified date. If they secure a buyer and complete their home sale, the new purchase contract moves forward.

Title Contingency

A title search looks through public records to ensure there aren’t unknown liens on the property or additional owners with rights to the property that can affect the purchase. This is important because old debts can become the current owner’s responsibility, and you want to ensure the seller has every right to sell the property to avoid ownership disputes down the road.

If a title search comes back with unpaid property taxes or ownership questions, the buyer can leave the agreement. A title contingency is required by most lenders, and even cash buyers are advised to include this clause in their contract.

There are certain contingencies that home buyers commonly write into their offers. Let’s take a look at each one in more detail.

Mortgage Contingency

A buyer who requires a mortgage to purchase a property may choose to include a mortgage contingency clause in their offer. This contingency will enable the buyer to break the contract and walk away from the deal without losing their earnest money deposit if their financing is delayed or falls through.

While an accepted mortgage contingency will protect you in the case of financing setbacks, you should still get preapproved for a loan. Doing so will streamline the process and provide the seller with confidence that you’ll ultimately be able to obtain a loan large enough to cover the sales price of the home.

Home Sale Contingency

A buyer who does not need a loan but is reliant on the funds from the sale of their current home to purchase a new one may opt to include a home sale contingency clause in their offer. This contingency provides the buyer with a specific time to sell their home. If they cannot secure a buyer within that time and therefore cannot obtain the funds necessary to purchase the new house, they’re free to withdraw their offer and recover their deposit without consequences.

Home Inspection Contingency

After making an offer, it’s customary to have the home inspected. Sometimes, a home inspection can reveal serious, unexpected issues with the property that may affect the buyer’s desire to purchase the home or willingness to pay the price initially offered.

With a home inspection contingency, buyers are provided with the ability to void the sales contract or renegotiate the offer. When renegotiating, a buyer has the power to insist that the seller makes repairs or lowers the purchasing price based on the cost of the work needed. When a buyer and seller can’t reach an agreement, the buyer again has the option to walk away.

Appraisal Contingency

Before agreeing to provide financing, lenders require properties to be appraised. They do this to ensure they’re not lending more money than a home is worth. When appraisals come in lower than the purchasing price, home buyers are still on the hook for the agreed-upon price and must find a way to make up the difference. This is unless, of course, they included an appraisal contingency in their offer, in which case buyers can break the sales contract if the home appraisal is less than the purchasing price.