Should I Accept an Offer with Contingencies?

Should I Accept an Offer with Contingencies?Preparing to sell your home in Boulder? Some offers will likely include contingencies. Contingencies are conditions that must be met for the sale to proceed, and they can significantly impact the timeline and outcome of the transaction. Before accepting an offer with contingencies, make sure you're well-informed about them.

What are contingencies?

In the process of selling your home, you will receive offer letters that include all the details the potential buyer is including, like the price, the down payment, timelines, and contingencies. A contingency is any condition that must be met for the transaction to move forward.

Common Contingencies

A contingency in the offer can be just about anything, but you will find a few common ones. 

Home Sale Contingency

Some real estate professionals say you should avoid accepting an offer with a home sale contingency. Home sales expert Bill Gassett of Maximum Real Estate Exposure provided helpful information on considerations with contingent offers.

"In most real estate contracts, there will be at least one contingency. The most common are a home inspection and mortgage financing contingency. Seeing these contingencies is to be expected unless it is an overheated seller's market with multiple offers. The one contingency home sellers need to avoid is a home sale clause. Letting a buyer have a home sale contingency can be a significant mistake. By allowing a home sale clause you lose complete control over the process of selling your property. If a buyer really wants your home, they will get their home sold first and come back when there in a position to buy."

If you have the flexibility to take this risk and the offer with the home sale contingency is worth it to you, you may decide to move forward with it. Just keep in mind that you're taking a bigger risk with this contingency than most."

Inspection Contingency

An inspection contingency will be a part of nearly every offer. This basically says that the buyer has the right to back out of the sale or renegotiate the terms if there is a problem revealed in the home inspection

If significant issues are uncovered during the inspection, the buyer may request repairs or credits from the seller, or they may choose to cancel the contract altogether. The timeframe for the inspection and negotiation of repairs is typically specified in the contingency. In most cases, this is a reasonable and expected part of any offer.

Appraisal Contingency

An appraisal contingency is another extremely common one, and it gives the buyer the right to cancel the contract or renegotiate the purchase price if the property appraises for less than the agreed-upon sales price. Lenders generally require an appraisal to ensure that the property's value supports the loan amount. If the appraisal comes in lower than expected, the buyer may request a price reduction or terminate the contract.

Financing Contingency

A financing contingency, also known as a mortgage contingency, allows the buyer to back out of the contract if they are unable to secure financing for the purchase. This contingency typically includes a specified timeframe for the buyer to obtain a mortgage commitment letter from a lender. If the buyer is unable to secure financing within the specified timeframe, they can cancel the contract and receive their earnest money deposit back.

There's no need to immediately ignore the offer because of a financing contingency. Take a look at other factors, like the earnest money offered or the down payment, to show the financial strength of the buyer.

Title Contingency

A title contingency allows the buyer to cancel the contract if there are issues with the property's title, such as undisclosed liens, encumbrances, or easements. The buyer typically has a specified timeframe to review the title report and address any concerns with the seller. If unresolved title issues are discovered, the buyer may choose to terminate the contract or negotiate with the seller to resolve the issues.

Choosing the Right Offer

Because every seller has their own needs and each potential buyer's offer is unique, the best way to know you are making a good choice when accepting an offer is to work with a realtor you can trust. With our years of expertise, we know how to negotiate and advise to help you get the best offer possible. 

If you're ready to learn more about the current market value of your home or how to successfully sell your home in Boulder, we can help. Contact us any time to get started. 

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