Yes! Once you find your dream home and it happens to be marked as contingent, you can still place an offer. Here’s all you should know about contingent sales as a potential home buyer.
Real estate listings go through different stages. An active listing means the home in question is currently on sale, and sellers are actively open to offers.
What about houses listed as “contingent?” Many potential home buyers ask what contingent in real estate means. Homes listed as contingent mean a home seller has accepted an offer on the house, and the sale is going through once a specific criterion (highlighted in the contract) is met.
Homes that are listed as pending or sold are officially off the market.
Can a home listed as contingent fall through?
YES! Home purchase contracts can be terminated because of factors such as job loss. Other factors can also put a home back on the market. These include;
- Finances falling through
Since most homes are financed, and financing isn’t guaranteed until a buyer has signed the dotted line, failure to secure funds can put a home back up for sale.
While financing may be pre-approved, the process is complex. Something can come up (such as an unanswered financial obligation or a significant purchase before the closing that changes the debt-to-income ratio) and put a home back.
- Low appraisal
Real Estate appraisals are usually completed when homes are bought via mortgage loans. A qualified appraiser establishes the home value via many factors ranging from location to condition. Appraisals that are lower than expected may put a home back on the market. This is common when a seller doesn’t agree on the lower price. The lending institution can also stop the transaction.
- Home inspection problems
Home inspections are standard practice when buying a home and don’t usually stop a sale unless there is a severe underlying issue with the property. An example would be severe foundation damage or the roof needing replacement.
- Buyer can’t sell their current home
Some contingent offers are subject to a home buyer being able to sell their current home to be able to finance the new one. Most homebuyers can’t afford to carry two mortgages simultaneously. If the house doesn’t get sold in the stipulated time, the sale can fail to materialize.
The clause is referred to as a home sale contingency.
- The title search reveals issues
Whenever you’re purchasing real estate, a title search is one of the standard boxes that must be checked. The title needs to be clean. Sometimes significant problems are revealed that could hinder the closing happening.
Placing a purchase offer on a contingent home
If you put an offer on a property marked contingent, you could be the next buyer should the current contract fall through. You can fail to get a response if the sale goes through.
The seller can also promise to get back to you. You’ll want to make a backup offer to put yourself in the game.
Is it worth it to buy a contingent home?
It depends. If you really want a home, it makes sense to attempt to buy it even when it is marked contingent. If it’s your dream house, it could be worth hanging in to see what happens.
Hanging on for a contingent home is worth it since a home sale isn’t complete until closing. Many potential home buyers overlook contingent homes simply because they think such homes are as good as sold.
However, many home sellers are looking to get out of contingent contracts if better offers are waiting and the current buyer is being difficult.
When it isn’t worth it to buy a contingent home?
To get a contingent home, you will most often be required to offer a higher home buying price. If you aren’t willing to pay more, a contingent home may not be a good idea. It may also take more time since a seller is getting out of a committed relationship.
In a nutshell, you can offer to buy a contingent home. However, make sure the home is worth it and you are willing to buy immediately at a considerably higher price. For the process to be smoother, it helps to prepare your finances beforehand.
Is there a difference between contingent and pending?
Yes! In a nutshell, a pending home sale usually no longer has any contingencies to satisfy. On occasion, some real estate agents will mark a home pending before all the contingencies have been removed if they’re confident they will be satisfied.
Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 35 years. Bill is the owner and founder of Maximum Real Estate Exposure. For the past decade, he has been one of the top RE/MAX REALTORS® in New England.