Imagine you’ve spent months searching for that perfect home, and finally, you’ve found the home of your dreams. There’s just one problem: it’s listed as contingent. What does this mean?
An offer has been accepted
So here’s the bad news, if this is the home you really want to buy: an offer’s been made on the property, and the buyer has accepted it. It’s time to start looking elsewhere, right? Well, if you’re looking to buy in a hurry, sure. However, if you’re not in a rush, all hope may not be lost. The contingent status means that while the offer has been accepted, the sale isn’t final, and is still an active listing.
When does the status change from contingent to pending?
For a sale to be classified as pending, certain criteria must be fulfilled. If not, the buyer can back out of the sale, generally also getting their deposit back. This makes a sale contingent. According to Realtor.com, these contingencies most commonly fall into three categories: appraisal, home inspection and mortgage approval.
Here, a third party hired by the lender evaluates the property to determine the market value of the home. This affects your mortgage, as the lender bases the loan on market value rather than the listed price. Having this kind of contingency in place protects the buyer from overpaying.
In this contingency, a home is thoroughly inspected by professionals, allowing the buyer to determine whether or not improvements need to be made on the property, or things need to be fixed. In this case, if something is found to be wrong, the buyer could ask the seller to make certain repairs, and if they refuse, the buyer can back out of the sale.
Another important contingency, this protects buyers in case their mortgage lender refuses the loan. Typically, the buyer will have a certain allotted period to find an appropriate lender, and if they don’t, they can walk away from the sale with their down payment typically refunded.
Sale and Settlement Contingency
This is another important contingency for those buyers who also happen to be selling a property. As explained by Investopedia, the seller of the home with this contingency in place can continue listing their home, and if they receive another offer, the original buyer is given a period to remove the contingency and proceed with the transaction. Similarly, a settlement contingency on its own means an offer has been made on the buyer’s current home, but if the offer falls through, they’re able to back out of buying their new home, allowing the buyer to avoid owning two homes and paying two mortgages.