How to Beat a Contingent Offer on a House

When making an offer on a home, a contingent offer includes specific conditions that must be met for the purchase agreement to become fully binding. These conditions protect the buyer by allowing them to withdraw from the contract without penalty if certain criteria are not satisfied. Contingent offers are a standard part of real estate transactions, providing a framework for buyers and sellers to navigate uncertainties before finalizing a sale.

Common Real Estate Contingencies

A home purchase often involves various contingencies designed to protect the buyer. The financing or mortgage contingency permits the buyer to cancel the contract and receive their earnest money back if they are unable to secure a loan. This provision typically includes a timeframe for loan approval, often ranging from 30 to 60 days, during which the buyer works with their lender to finalize financing.

The appraisal contingency ensures the home’s value, as determined by a professional appraiser, meets or exceeds the agreed-upon purchase price. If the appraisal comes in lower than the sales price, this contingency allows the buyer to renegotiate or withdraw from the deal. The timeframe for an appraisal contingency typically spans between 7 and 20 days.

The inspection contingency grants the buyer the right to have the property professionally inspected for defects or issues. Should significant problems be discovered, the buyer can request repairs, negotiate a price reduction, or cancel the contract. This contingency period is often set for around 7 to 10 days following offer acceptance.

A sale of existing home contingency makes the current purchase dependent on the buyer successfully selling their current property by a specified date. This can be complex, as it ties one transaction to another. Other contingencies might include those related to title review, ensuring clear ownership, or the review of homeowner association (HOA) documents.

Steps for Buyers to Satisfy Contingencies

Buyers must manage each contingency to ensure a smooth transaction. For a financing contingency, securing loan approval requires promptly submitting all requested financial documentation to the lender, including income verification, asset statements, and credit history. Buyers should respond swiftly to any inquiries from their loan officer and meet all application deadlines. Maintaining stable employment and avoiding new debt during this period is important, as changes could jeopardize loan approval.

If the appraisal contingency is in place and the home’s appraised value is lower than the agreed-upon purchase price, buyers have several options. They might bring additional cash to closing to cover the difference between the appraised value and the purchase price. Alternatively, buyers can attempt to renegotiate the purchase price with the seller to align it with the appraised value. If an agreement cannot be reached and the contract terms allow, the buyer may choose to withdraw from the purchase, typically receiving their earnest money deposit back.

For the inspection contingency, arranging a thorough home inspection by a qualified professional is the first step, ideally within the typical 7 to 10-day period. After receiving the inspection report, buyers should review it carefully for significant defects or safety concerns. Based on the findings, buyers can formally request repairs or credits from the seller, often within a negotiation period of about five days. Understanding the specific timelines for submitting objections and reaching a resolution, as outlined in the purchase agreement, is important for effective negotiation.

When a sale of existing home contingency is part of the offer, buyers should implement strategies to expedite the sale of their current property. This includes competitively pricing their home, ensuring it is market-ready through necessary repairs and staging, and engaging in effective marketing efforts. Buyers might also explore financial solutions like a bridge loan, which temporarily covers the new home’s costs until the existing property sells.

Seller Considerations for Contingent Offers

When a seller receives a contingent offer, evaluating its terms is important. Factors to consider include the buyer’s financial strength, demonstrated through pre-approval letters or proof of funds, and current market conditions, as a strong seller’s market might allow for less flexible terms. The specific duration of each contingency, such as a 30-day financing period or a 7-day inspection window, and the buyer’s overall motivation also play a role in assessing the offer’s attractiveness.

Sellers can negotiate contingencies to their advantage, aiming to minimize risks and delays. Proposing shorter contingency periods can reduce the time the property is off the market. For appraisal contingencies, sellers might suggest an appraisal gap clause, where the buyer agrees to cover the difference between the appraised value and the purchase price up to a specified amount. In cases of a sale of existing home contingency, a ‘kick-out’ clause allows the seller to continue marketing the property and accept a stronger offer, giving the original buyer a limited time, often 24 to 72 hours, to remove their contingency or lose the home.

Facilitating the buyer’s fulfillment of contingencies helps ensure a smoother transaction. This includes providing timely access to the property for inspections and appraisals. Sellers should also be prepared to disclose all known material facts about the property and address reasonable repair requests that arise from the inspection, as this can prevent the deal from falling through.

Sellers should understand the buyer’s obligations and contractual deadlines within the contingent offer. Monitoring the progress of each contingency, such as the buyer’s loan application or inspection scheduling, is advisable. If a buyer fails to meet a deadline or fulfill a condition as stipulated in the contract, the seller may have the right to terminate the agreement and potentially retain the earnest money deposit, depending on the specific terms of the contract.