How does a contingent offer work?

As a real estate expert with years of experience in property transactions, I can provide a comprehensive understanding of how a contingent offer works, particularly in the context of home sales.
A contingent offer is a type of clause that is often included in a real estate sales contract, and it stipulates certain conditions that must be met before the contract becomes legally binding. The most common type of contingency is a home sale contingency, which is particularly useful for buyers who need to sell their current home before they can purchase a new one. Here's a detailed breakdown of how it works:

**Step 1: Understanding the Contingent Offer**
The first step in understanding a contingent offer is to grasp its basic premise. A contingent offer is essentially a conditional agreement. It says that the buyer is willing to move forward with the purchase, but only if certain conditions are met. These conditions can vary, but in the case of a home sale contingency, the condition is typically the sale of the buyer's current home.

**Step 2: Including the Contingency in the Offer**
When a buyer makes an offer on a property, they can include a contingency clause in their offer. This clause will specify the terms of the contingency, including what the buyer's current home must sell for, within what timeframe, and any other conditions that are important to the buyer.

**Step 3: Seller's Consideration and Acceptance**
The seller then has the option to accept, reject, or negotiate the terms of the contingency. If the seller accepts the offer with the contingency, the contract becomes legally binding, but the sale is still subject to the conditions of the contingency being met.

Step 4: Meeting the Contingency
If the contingency is that the buyer's home must sell, the buyer will need to actively market and sell their home. They will need to provide proof to the seller that they have met the conditions of the contingency, such as a signed purchase agreement from a buyer for their current home.

Step 5: Contingency Deadline
There is usually a deadline for the contingency to be met. If the buyer's home does not sell within the specified timeframe, the seller has the right to cancel the contract and potentially sell the property to another buyer.

Step 6: Removing the Contingency
Once the buyer's home is under contract, they can request that the contingency be removed. This is typically done in writing and requires the approval of both the buyer and the seller.

Step 7: Closing the Deal
If all conditions of the contingency are met and the contingency is removed, the sale can proceed as normal. Both parties will then move forward with the closing process, which includes finalizing the paperwork, transferring the title, and completing any other necessary steps to finalize the sale.

Advantages of a Contingent Offer
- Flexibility: It provides flexibility for the buyer who needs to sell their current home before purchasing a new one.
- Risk Mitigation: It mitigates the risk of ending up with two mortgages if the buyer's current home doesn't sell.
- Leverage in Negotiations: It can give the buyer some leverage in negotiations, as they are not desperate to buy.

Disadvantages of a Contingent Offer
- Less Attractive to Sellers: Sellers may be less inclined to accept an offer with a contingency because it introduces uncertainty into the transaction.
- Potential for Delays: There may be delays in the sale process if the buyer's home takes longer to sell than expected.
- Competition Issues: In a competitive market, a buyer with a contingent offer may lose out to a buyer who can close quickly without conditions.

In conclusion, a contingent offer can be a useful tool for buyers who need to sell their current home before purchasing a new one. However, it's important to carefully consider the terms of the contingency and how they might impact the sale process. Working with a knowledgeable real estate professional can help navigate the complexities of contingent offers and ensure a smooth transaction.

A home sale contingency is one type of contingency clause frequently included in a real estate sales contract (or an offer to purchase real estate). With a home sale contingency in place, the transaction is dependent (or contingent) upon the sale of the buyer's home.Feb 10, 2017