A non contingent offer on a house means that the buyer did not include any contingencies in their offer. Would you rather have a buyer give you an offer that is contingent upon certain conditions being met or an offer without any of these conditions?
When a buyer includes any type of contingency in their offer, they need to remove it before the closing date. This happens on an addendum to the purchase agreement called a contingency removal form. Shortly after a purchase agreement is under contract, the buyer will make a deposit to the escrow company. This is referred to as a good faith deposit or an escrow deposit.
The buyer risks losing this deposit to the seller should they want to back out of the sale after removing their contingencies. This is why a non contingent offer on a house is more attractive to a seller. Contingent on a house means that the property is under contract but some contingencies need to be met before the sale is final. A property that is pending means there are no contingencies.
The buyer can make their offer contingent upon any type of contingency , but there are four that are more common than others. A contingency period is the number of days that a buyer has before they need to remove that specific contingency. The lower the number of days is, the more attractive it looks to the seller. When most people hear of an inspection contingency, they think of a home inspection contingency. While a home inspection is the most common inspection for a buyer, there are other inspections they might want to have done.
This contingency period allows them to do any and all due diligence on the property that they want. Or maybe the home has previous structural modifications and they want to check on the permits. No matter what it is, this is the time for the buyer to finish doing their homework on the property. A seller has the option to have their inspections completed before marketing their property and putting it on the MLS. When they do, it not only allows them to know what they might need to have fixed ahead of time, but it also gives prospective buyers more information about the property to help them make a more informed decision about what kind of offer they want to submit.
This information is helpful because, without it, buyers may be hesitant about making an offer. When a seller has inspections completed upfront, it improves the chances of a buyer not making their offer contingent upon any inspections.
And it also reduces the chances of the buyer backing out of the sale or trying to renegotiate after their offer is accepted. This is why getting inspections completed before selling is one of the best tips when selling your home. After going through the report with their agent, the buyer feels there are a couple of items that need to be addressed. The location and type of market will affect what the buyer decides to do. If the buyer wants to ask the seller to repair the items, they need to have their real estate agent send over a repair request.
When this happens, the inspection contingency will be extended until the work is done. Once the work is completed, the buyer will submit a contingency removal form to the seller and their inspection contingency will be released. Real estate contingencies protect your interests, but be aware that too many stipulations in the contract can reduce the likelihood of the seller accepting your offer, especially in a tight market.
Here are the most common types of contingencies included in home purchase agreements:. A home inspection contingency lets you negotiate the sales price, ask for repairs or walk away from the sale based on the inspection results.
Your contract may stipulate that repairs must be made if problems are uncovered, but that can lead to closing delays while the fixes are scheduled and approved. You may prefer to renegotiate the sale price if significant improvements are needed. In hot markets, buyers may feel pressure to forgo home inspections altogether to win bidding wars.
But skipping a home inspection is risky, and there are other ways to strengthen an offer, such as making a larger down payment. A mortgage contingency gives you an out if you don't qualify for a home loan. Preapproval is important, but it's not an absolute guarantee. After a home is under contract, your loan still must go through a final stage of underwriting.
Just as real estate contracts must be carefully written, contingencies should also be drafted with great caution. Real estate brokers, for example, use contingency forms written by attorneys. Attorneys are trained in the art of legal writing, a craft where words have specific meanings. Whether or not a seller should accept a contingent offer depends on the facts and circumstances for each transaction. The goal is to sell the property with the best price and terms and to do that, owners will likely be required to accept certain contingencies.
For example, buyers might want to limit their interest-rate exposure to the prevailing market rate at the time the offer is made. However, an offer with no mortgage pre-approval — but a financing contingency, tiny down payment and low-interest rate limit — should make you nervous. Specifics are better than generalities. Related: Earnest money, down payment, and closing costs. The riskier the offer as in no pre-approval, the need to sell another home, and a picky inspection clause , the more earnest money you should demand.
In some cases, like a very long escrow and a home sale contingency, you can even make the earnest money requirement non-refundable. Meaning that if they fail to close for any reason, you still get compensated.
This might happen when a buyer repeatedly requests extensions for closing. You can say yes but charge for the privilege.
It might also be an all-cash offer, so financing is not an issue. In such situations, sellers will want a solid deposit as well as a careful review of the offer. Related: How to get out of a real estate contract. The world of contingencies is complex. Both buyers and sellers should speak with real estate brokers for more information.
There are standard offer contingencies in every real estate transaction, like your buyer's ability to inspect the property and to view the title report. Those contingencies are normal, but there's one contingency all sellers should be wary of. If you get an offer that's contingent on the sale of your buyer's home, you'll most likely want to pass. But why? The main reason you should hesitate to accept a contingent offer is because there's a lot of risk involved. Selling a home is challenging enough as it is.
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