Buying or selling a house is like embarking on a thrilling roller coaster ride. There are twists, turns, and unexpected loops that can make the journey both exhilarating and nerve-wracking. One term that often crops up in the real estate adventure is the "contingent offer." But what exactly does it mean, and how does it impact both buyers and sellers? Let's take a closer look at this crucial aspect of the real estate world.

What is a Contingent Offer?

In the real estate realm, a contingent offer refers to an offer made by a buyer to purchase a home, but with certain conditions or contingencies attached. These conditions typically involve specific tasks or events that must occur before the sale can be finalized.

Sometimes this term is used to cover the due diligence process and to protect the buyer’s right to terminate the contract to purchase during the due diligence process.

Sometimes, this term refers to a contingency built into the offer itself as a requirement for the buyer to fulfill their obligation and purchase the property. These conditions are significant, such as the buyer having to sell their current home first and use the proceeds of that sale to complete their purchase of the new home. 

Pros for Buyers

• Due Diligence: One of the primary advantages of contingent offers for buyers is the opportunity to conduct thorough due diligence on the property. Common contingencies include home inspections, appraisals, and financing approvals. These steps allow the buyer to ensure that the property is in good condition and that there are no hidden issues that could lead to regret down the road.

• Flexibility: Contingent offers provide flexibility for buyers, allowing them to navigate the often complex process of purchasing a home. If a contingency is not met, the buyer can usually withdraw from the deal without significant consequences, providing a safety net in case unforeseen issues arise.

• Negotiation Power: Buyers with contingent offers may have some negotiation power. For example, if the inspection reveals necessary repairs, the buyer can negotiate with the seller to either address these issues or adjust the sale price accordingly.

Cons for Buyers

• Risk of Losing the Property: In a competitive real estate market, sellers may be hesitant to accept contingent offers, fearing that it might delay the sale. If another buyer with a non-contingent offer emerges, the seller may opt for the more straightforward deal, potentially leaving the contingent offer buyer without a home. This is especially true with contingent offers where the buyer must sell their current home first. If they are unable to sell their home within the time frame, they are not able to complete the purchase and are in breach of contract.

• Potential Expenses: While contingencies offer protection, they can also result in additional expenses for the buyer. For instance, if the inspection unveils problems, the buyer might incur costs for further evaluations or repairs.

Pros for Sellers

• Negotiation Power: Because not all sellers are willing to accept an offer from a buyer who needs to sell their own home first, a patient and savvy seller could use this position as leverage to negotiate a higher purchase price. 

• Flexibility: Sellers might still entertain backup offers while under a contingent agreement. If a non-contingent buyer makes a compelling offer, the seller has the flexibility to accept a backup offer if the primary offer does not close. 

Cons for Sellers

• Extended Time frame: Contingent offers often extend the time frame for completing the sale. If the buyer needs to secure financing or complete additional inspections, it can prolong the closing process, leading to potential delays.

• Uncertainty: Sellers face uncertainty when dealing with contingent offers. If the buyer's contingencies are not met, the deal may fall through, leaving the seller back at square one.

Contingent offers provide a level of protection and flexibility, but they also come with their own set of challenges. It's essential for both parties to carefully weigh the pros and cons and communicate openly to ensure a smooth and successful transaction.

As you embark on your real estate journey, remember that each contingent offer is a unique ride with its own twists and turns. By understanding the intricacies of contingent offers, you can navigate the real estate roller coaster with confidence and make informed decisions that will ultimately lead you to the home of your dreams.

After years in advertising and marketing, living and working for companies in Georgia, North Carolina, and China, I decided to acquire my real estate license so I can use my established marketing and communications skills to help others and work for myself.

For many people, buying and/or selling their home is one of the most important and most stressful times of their lives. Having an advocate and an agent who has experienced years of corporate marketing, managing teams through challenging projects with tight deadlines, and negotiating complex deals - will aid in the home buying or selling process.

If you or anyone you know is interested in real estate investment, a personal real estate search, or property management, please reach out to me directly - I would love to provide my services to help find your goal property as soon as possible.

Bo Hardegree, NC Real Estate Broker
Espin Realty
[email protected]
704-748-0958