You’re excited about that home you’ve just found and can’t wait to strike a deal. After sometime you realize it has a “contingent offer” status. What does a contingent offer mean? If you are careful, you’ll realize there are many other properties that have the same status.
A contingent offer simply means an offer has been made on a real estate property but the finalized sale is contingent pending the fulfilling of a certain criteria. The offer is usually made contingent for the buyer to back out of the sale in case things don’t turn out as expected. This allows him to have his deposit back. Meanwhile, the seller may receive offers from other buyers but can’t make any deal until the contingent offer is complete.
- Appraisal Contingency
Appraisal contingency involves hiring a third party to evaluate your home’s fair-market value. Note that it is the lender who hires the third party. If the appraised value is found to be lower than the sale price, the buyer can back out of the deal.
- Home inspection contingency
Professional inspection is always important before anyone buys a home. This is where a home inspection contingency comes in. In fact, it is the most important of the three. After the inspection the buyer can either choose to walk away from the sale or request for any problems to be fixed. You can’t hide a problem in your house. A good inspection by a professional will always find it.
- Mortgage contingency
This type of contingency helps in protecting both the seller and buyer from making a sale without the money to back it up. No one is willing to sign a property sale when there is no money. The buyer is required to get a loan that will cover the mortgage. This should be done within a specific period of time and if he fails to find a lender to commit a loan, he is free to leave the sale with the down payment made.
It is important for the buyer to know if he is qualified so that he doesn’t waste the seller’s time as he hunts for a loan. Remember this can take a couple of months.