Purchasing your dream house can be a lot hectic. It is stressful to take this big step as there are so many legalities and customs associated with it. In this article, I will be discussing one such custom that is linked to the purchase of a property. Keep reading till the end to find out more information on what does contingent mean in real estate!
What Does Contingent Mean In Real Estate?
If you are wondering what does contingent in real estate mean, then let me guide you on the same. The meaning of the word “Contingency” actually depends on circumstances.
When it comes to real estate, property gets listed as a “contingent”, which indicates that an offer has both been made and accepted. But there’s a catch: it is still under process as there are some sort of criteria that need to be met before the deal is made complete.
An instance would be – a seller has offered a particular price and the buyer has agreed with the price. Now, just the home inspection needs to come back clean. This makes a real estate contingent contract. This deal is only going to be marked complete when the home inspection backs squeaky clean.
I hope that answers your question of what contingent in real estate mean.
How Do They Work?
When a real estate ownership deal is marked “contingency”, that necessarily indicates that the buyer has put forward a condition to be met before the deal can be finalized. Contingencies work to protect the buyer from home listings that are problematic.
You need to know that making a Contingency offer is much easier if you have found a particular lender with whom you want to work. This is effectively going to ease any fear of the seller or the buyer failing to provide the mortgage or having a lack of financing.
It is advised that you start the process of approval as soon as you decide on buying a home. In this way, you are going to effectively increase your chances of having the seller accept your contingencies.
Popular Types Of Contingencies
Now that you know what does contingent mean in real estate, you must get an understanding of the different types of Contingencies that are available out there.
Here is a list of some of the more common types of Contingencies that you may come across as a buyer:
Title Contingency
The title of the home reveals the person to whom the house belongs and who has owned it all along. However, oftentimes it might also indicate the encumbrances – which are essentially mortgage lien or easement issues from the past.
Any made claims against the title can make the purchase for buyers very risky.
Appraisal Contingency
This contingency majorly comes into play when the topic is about mortgages. The seller can ask for a huge sum, and you might also be willing to pay it. But you need to know that the price that is asked of you – does not necessarily indicate the value of the property.
The lenders hence, require an appraisal, which is a 3rd party view of what the home is essentially worth.
Even if both parties are agreeing on a sale price, the lender won’t be able to offer a mortgage that is larger than what the property is appraised for.
Tip: I answered about – ‘in real estate what does contingent mean’, towards the beginning of the article. If you have mistakenly skipped it, then you can go back and give it a read to get the answer on ‘what does contingent mean in real estate’.
Home Inspection Contingency
This particular contingency enables a home inspector to assess the condition of the property. They check out all the aspects of the property that might otherwise not visible to the common folks.
If the result of the inspection is such that the presence of some serious flaws is confirmed – the buyer can back out from buying the property. Or it might be so that both of the properties negotiate on who is going to pay for the flaws to be fixed.
Mortgage Contingency
The Mortgage form of contingency is going to provide the buyer with a specified period for securing the finance.
On a better note, financing contingency can be handled mostly by performing some due diligence. To do that first, you are going to have to make sure that you have already been approved for getting a mortgage as a ‘buyer’.
Home Sale Contingency
Getting a pre-approval of that sort is going to put you even closer to getting the mortgage.
But also do know that just being pre-approved does not indicate you have qualified for a mortgage. You are still going to have to check in with your lender after making the offer.
Frequently Asked Questions (FAQs):
Here is a list of some of the most frequently asked questions regarding the topic “What does contingent mean in real estate”:
A: As a seller, you are not required to put any contingencies in any of your offers, but it is always beneficial to include them so that you can earn the earnest money. A majority of buyers always include some or the other form of contingencies when they make any offer.
A: If there’s a seller that fails to satisfy the offer’s listed contingencies, then the deal would break and the sale wouldn’t proceed.
A: Waiving contingencies is a great idea, especially in the seller’s market. Here there are more buyers than there are properties available. By waiving the contingencies, you are going to be able to make your offer stand out amongst all and this would likely increase the seller accepting your proposed offer.
To Wrap It Up!
I hope you got a proper grasp on the working of a contingency when it comes to real estate. Make sure that you are doing your proper research on the house/ property before finalizing the deal.
That was all for information regarding what does contingent mean in real estate and other things related to it. Thank you for reading up till here. I hope you found the information useful.
Read Also:
- What Is ARV In Real Estate
- How To Find Real Estate Agencies?
- 7 Things To Look For When Hiring A Real Estate Agency
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