Imagine, if you will; you want to put an offer on a home that you like—you love it! But you aren’t sure how it will appraise, if you will qualify for the loan, you would like more details about the HOA, you want a professional home inspection, but you don’t want to spend the money if you don’t get the home.
What do you do? Don’t worry, contingency is a consumer-friendly tool. Modern real estate contracts are full of contingencies.
In real estate, contingency is a noun for the adjective “contingent”-which means subject to, dependent on, or provided that a certain future event is met.
There is no such thing as a “non-contingent” offer. We use contingencies in real estate contracts every day. Some of the most common are:
- Title
- Loan
- Appraisal
- Home inspection
- HOA disclosures
- General seller disclosures
- Natural hazard disclosures
- Sale of a property
A seller does not have to accept all contingencies. Just remember, it is in everyone’s best interest to strike a deal that is reasonable for the parties involved.
It is common for a buyer to make an offer contingent on the sale of the buyer’s current home. Many times, sellers will not go for that. It will depend on the factors like the strength of the offer, or if the seller believes the buyer’s sale will close.
In very competitive markets, on occasion, buyers may wave certain contingencies like the appraisal. They would do this to make their offer more attractive to the seller. It is all part of the deal.
Sometimes, there are even seller contingencies. Some sellers may make they're finding a replacement property a contingency of an agreement. Just like the seller, the buyer does not have to accept the contingency, but they might not get the deal unless they do.
Most contingencies in a real estate contract have an expiration date and a method of removal. The default expiration time in the current California Association of Realtors® contract is 17 days for most contingencies, and 21 days for loan contingencies, but these dates are often adjusted. They are either shorted to make an offer more attractive or lengthened during escrow as sometimes it takes longer to clarify certain issues.
Today’s California Association of Realtors® contract has what we call “active” removal of contingencies which means that the buyer must sign off to remove them. This is probably best left for future topics.
Sometimes, sellers may feel that all these contingencies only help the buyers. It might be frustrating, but sellers should understand that having these contingencies take a lot of the risk out of the buying process and makes it consumer-friendly. This helps fuel our robust housing market.
Does it seem like a lot for you? Don’t worry, here at the Mike Dunfee Group, we’re happy to walk you through this process.
Dunfee Real Estate Services, Inc.
DRE # 02026232
