|🏡 What does contingent mean?
In real estate, contingent means a property sale depends on certain factors being met, aka “contingencies.”
A contingent property sale can only happen if the buyer’s contingencies are met. For example, if a property is contingent on a home inspection, the seller must wait for the buyer to inspect the property and confirm they want to go through with the sale by removing the inspection contingency.
A contingent buyer is a buyer has one or more contingencies in their purchase offer.
A contingent buyer can only complete a home purchase if certain conditions are met — like first selling their current home or getting a loan approved. Compared to cash offers, contingent offers take longer to complete and are at a higher risk of falling through.
Contingent buyers are more common than cash buyers. Depending on where your house is located, you might only be dealing with contingent offers. There’s nothing inherently wrong with a contingent offer, but some contingent buyers may require you to jump through more hoops than others.
Here are three things you should consider when fielding offers from contingent buyers.
You’re Dependent on Your Buyer’s Timeline
Contingent buyers usually have one of two possible clauses in the contract: a settlement contingency or a sale and settlement contingency.
- A settlement contingency means the individual already has a buyer for their current home and is waiting for closing so that he or she can purchase their new home.
- A sale and settlement contingency means the individual doesn’t have an offer yet – but that they must sell and settle the house before he or she can purchase your property. In this case, they will continue to market their property. The buyer can amend their sale and settlement clause and change it to a settlement clause once an offer has been accepted.
In both situations, you must wait until the buyer completes a sale before your contract moves forward. That means that you may not be able to move quickly, and you may end up waiting for several weeks or even months before completing your sale.
Other common contingencies from contingent buyers include:
» Learn more: Common Contingencies and How to Remove Them
You May Have a Hard Time Finding a Backup Buyer
You can negotiate with a contingent buyer to still market your home while they are trying to complete their own home sale.
This can make it easier to move forward with a new buyer if things fall through. However, since your home will show as pending on the MLS, you not receive any new offers. Potential buyers may be dissuaded from touring your home because they know the odds of getting your property are low and they don’t want to commit themselves to the house offer waiting game.
It’s also possible that your contract will stipulate that you cannot continue to market your home once you’ve accepted your buyer’s contingent offer. In this case, you will be unable to take new offers until a set period of time passes (like a contingency deadline) or until it is clear that the buyer will not be able to purchase the property.
Your Sale May Fall Through
A contingent contract allows your buyer to nullify their offer and walk away if their current home doesn’t sell or if their settlement falls through. As a result, you have a higher risk of your sale falling through when compared to working with other types of buyers.
If you do decide you want to consider a contingent buyer, take the time to research their situation. Find out if they have already listed their current home and whether it is a fair price, and compare their offer to others.