Contingency - Noun

By
Real Estate Agent with Atlanta Communities 303302

Contingency - A condition in a contract that has to be fulfilled before the contract is binding. - Encarta

When Buyers make offers on homes they wish to purchase, there are usually several contingencies that need to be met for the contract to be fulfilled. The normal ones are for Financing and Appraisals. These contingencies are put in the contract to protect the buyer in case their financing falls through or the home they want does not appraise for the value agreed upon between the buyer and seller.

If the financing falls through within your contingency time line, normally around 21 days from binding contract date, the buyer may terminate the contract and receive their earnest money back. Same holds for the appraisal. If it comes back lower than anticipated, and the buyer and seller cannot agree on a new price, again usually within 21 days or whenever the contingency period is within the contract, the buyer may terminate and receive their earnest money back.

These two contingencies usually do not cause problems and again are there for the protection of the buyer.

The contingency that I struggle with is the one that requires the buyer to sell a property before buying the new one. Sellers dislike these contingencies because of the unknowns involved. Will the buyers home sell in time for their home to close? Many sellers will not accept an offer contingent on the sale of a home unless it is already under contract.

Home sale contingencies make for weaker buyer offers as well. This can be partially overcome by offering full or close to full price for the new home and not asking for much more.

Contingencies usually come with time frames. At a particular set time, if the contingency is not met, the contract may fail and be terminated. At other times, if the failure happens after the time frame has lapsed the buyer might be in danger of terminating the contract and losing their earnest money. This is why your real estate professional will pay close attention to these time frames. 

When getting ready to buy or sell, make sure you understand contingencies.

Posted by

Peter den Boer, Associate Broker, Realtor

Atlanta Communities Real estate Brokerage

 

Ph. 770.713.1545

www.denboerhomes.com

 

I write about daily life as a Realtor in the Towne Lake Community in Woodstock Georgia.

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Rainer
113,133
Mike Baltierra
Rise Realty - Corona, CA
Full Service at Your Service Realtor-Corona CA

Contingencies can definitely be confusing to both buyer and sellers. It's very important for both to understand them and their time frames. Great explanation.

Nov 26, 2018 06:16 AM #1
Rainmaker
4,598,936
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
"Franklin MA Homes"

Good morning, Peter den Boer buyers must clearly understand the contingencies and this is another reason all of our clients have a real estate attorney from day one....all agreements are reviewed by their attorney prior to signing.... all of them.

Nov 26, 2018 06:53 AM #2
Rainmaker
1,693,349
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good morning Peter - that is a helpful explanation.  That last contingency can be a deal breaker.

Nov 26, 2018 06:58 AM #3
Rainmaker
4,956,324
Roy Kelley
Realty Group Referrals - Gaithersburg, MD
Roy and Dolores Kelley Photographs

Thank you very much for following my blog. Your comments are always welcome.

Nov 27, 2018 05:27 AM #4
Rainmaker
2,321,902
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

That's a good explanation of contingency, Peter.  And, you have outlined the downside when it comes to writing strong offers.

Nov 28, 2018 04:58 PM #5
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Peter den Boer

MBA,GRI, Associate Broker, Realtor
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