What are contingent offers? A contingent offer is an offer made by a prospective homebuyer to a seller. Conditions are attached to this offer that must be met before the sale can be completed. If the criteria are not met, buyers are entitled to a refund of their earnest money.
The criteria or contingencies typically fall under three categories: appraisal, home inspection, and mortgage approval. Let’s take a look at each of these contingency offers:
#1 -Home inspection contingent offer
This contingency offer gives the buyer the right to have the new home professionally inspected after putting down earnest money. Of the three contingency offers, the home inspection contingency offer is the most important one.
If the inspection finds something wrong, the buyer can request that the issues are fixed. The buyer can renegotiate the price of the home or walk away from the sale. It’s never a good idea to waive this offer. This inspection contingency offer is a must-have before you buy the home.
#2 – Appraisal contingency
A third party hired by the mortgage lender evaluates the fair market value of the current home for sale. If the appraisal is less than the sale price, the appraisal contingency allows you to back out of the deal.
The Buyer should never feel pressured to waive this contingency. Even in a hot market, you don’t want to end up paying more than the appraised cost. Waiving this contingency is a gamble you don’t want to lose.
#3 – Mortgage contingency
A mortgage contingency protects the buyer and seller from getting into a real estate sale without a proper loan. This contingency will provide the buyer with a specific amount of time to obtain a loan to cover the mortgage after the offer has been excepted.
The buyer can walk away from the sale with the down payment if he is unable to get a lender to commit to a loan. It is better to get preapproved sooner than later. Know what you qualify for before you make an offer.