By Alison Brown, California Listings Guest Columnist
While the real estate market experienced (mostly) ups and (slight) downs through the extended pandemic, it is still widely considered that buying a house is one of the best ways to build a wealth portfolio. There are no certainties, but attaining properties is always a good call.
Despite this, buyers should always protect themselves against both the inevitable and the unexpected. Even if there are no certainties, there are ways to work around this. Some home sales are “contingent,” that is, they are based on a “expectations” scenario that can allow buyers to back out of a sale or alter the purchase if something should fall short during the purchasing process.
What Is Real Estate Contingency?
The word “contingent” should read: dependent on certain circumstances. When it comes to real estate, a property listed as contingent means that specific additional criteria has to be met before a deal can be completed, even if an offer has been made or accepted. As you look through your local listings, bear in mind that whatever property you fall in love with should meet all your needs—from offer to close of sale.
When a seller offers a price and you (the buyer) agree to that price after a requisite and thorough home inspection, this is what is known as a “contingent contract” in real estate. The sale of the house or property depends on an inspection as defined by the contract, and if the inspection were to reveal additional repairs or flaws within the home, it could void a contract by its contingency clause.
What Does A Contingent Offer Mean For The Buyer?
Under a contingent real estate offer, you’ve made it known that a condition must be met before the sale moves into its final phase. If this condition is not met, the contract is then void and the seller can either go to their backup offer or the buyer can walk away from the sale. Contingencies exist to protect the buyer, especially when situations become problematic or contain issues that were not disclosed at the appropriate time.
What Is Considered A Common Contingency?
The average seller is going to prefer offers that come without contingencies. The buyer should be wary of this, and should not back down on their contingencies just because they feel they might lose the purchase. It’s better to “miss out” on a deal than to enter into something that is bad for both seller and buyer.
Anytime you back out of a deal without a contingency escape clause, you risk losing whatever money was offered to finalize the deal. Adding contingencies can be risky, particularly in hot markets or markets where houses are being actively flipped. While you always run the risk of someone having a better offer than you, minimizing your contingencies to solidify a purchase comes with its own set of risks.
Tomorrow, we’re breaking down the common contingencies buyers should consider adding to their agreements. Be sure to head back to CaliforniaListings.com on Wednesday, Nov. 10, for part two of our contingency series!
Alison Brown is marketing and communications expert with a passion for real estate, currently serving as the Marketing Strategist at Children’s Dental Fun Zone. She loves spending time with kids and contributes her insights by writing and promoting informative blogs for families to help them adapt to their new homes and localities without any hurdles.