Sometimes a deal can be well on its way to closing when suddenly a contingency gets thrown into the mix, and the whole thing goes south. It’s currently a seller’s market, which means sellers have more power, but it’s not a good idea to get too power hungry. Yes, there are buyers out there who might ask for excessive contingencies or certain contingencies that put you as the seller at a disadvantage; but it’s best not to lose your cool when buyers ask for typical contingencies. As long as the buyer has presented a sound offer (i.e. they haven’t lowballed on the price or asked for anything out of the ordinary), you should at least hear them out. Most contingencies buyers include in their offers are pretty common. A home sale might be contingent upon…
…the buyer’s ability to obtain financing. This is probably the most common contingency out there. While buyers should be pre-approved for a mortgage before they even consider writing an offer, there’s always the off chance that some hiccup could occur that prevents them from getting financing. The financing contingency gives the buyer a clear, easy out in this case. It also means that if their loan falls through, you’ll be able to get your home back on the market and find another buyer sooner rather than later.
...a satisfactory home inspection. Another common addition, the home inspection contingency is a no-brainer for buyers. Having an inspection done assures the buyer that they’re purchasing a house that’s free from any major deficiencies. After the inspection, buyers may send you a copy of the inspection report and ask for some repairs to be done before moving forward. As the seller, you have every right to accept or deny these repairs. Keep in mind that if something major comes up, you might have a hard time selling to anyone else if it isn’t repaired. It’s usually in your best interest to go ahead and take care of the issue or include an allowance for it in the purchase price. If no agreement is reached over repairs, both parties have the right to terminate the contract and walk away.
...the home appraisal. As we’ve addressed in the past, home appraisals are used by mortgage lenders to ensure the property in question is worth the amount the buyer has agreed to pay the seller. If the appraisal comes in at or over the purchase price, everything should go as planned. If the appraisal is less than the purchase price, you’ll probably need to go back to the negotiation table.
…the sale of the buyer’s current home. This contingency is a bit trickier. It gives buyers a legal way to back out of purchasing your home and gives you no protection. It usually puts sellers at a disadvantage since you have no way of knowing whether the buyer’s home will sell in time for your closing. If the buyer has presented a really attractive offer and their home is already under contract and well on its way to the closing table, you might want to consider accepting it, but include a contingency of your own. Make sure to include a stipulation that you and your agent can still market your home and court other offers. This is a good way to protect yourself in the event that the deal falls through.
…a clear title. A title is a legal document that serves as a history of your property’s ownership. During the sale of a home, a title company will check to make sure the title is clear of any liens, disputes, or other issues. You probably had this contingency back when you bought the house, and as long as you know there are no liens or claims against your house, you should be perfectly fine accepting this contingency. It just gives the buyer a way to back out if a title issue is unresolvable.
If a buyer brings you an offer with contingencies—and most offers to purchase will include them—your real estate agent will know which ones are common and which ones are red flags. Lean on their advice as well as your own research to help you keep your cool and get to the closing table without any added anxieties.