Build Idaho | 2020 BOISE IDAHO REAL ESTATE BLOG
What Does Contingent Mean in Real Estate? Main Treasure Valley Life

If you are looking for homes on the MLS and see the perfect home for you with the sales status “contingent”, does that mean you should move on and look for another house? You may still have a chance to put in an offer. Read on to find out how.

When a house is listed as “pending”, everything is finalized except for signing on the dotted line. When a house is listed as “contingent” the sale isn’t fully finalized. There are methods where a third party can still make an offer and/or the buyer can back out of the deal. Because buying a house is such a massive purchase, buyers, sellers, and lenders put contingencies in place to protect the parties from financial or safety problems that may arise from inspections, escrow, and appraisals.

Contingency is often called “walkout” or “walk away” clauses. In this article, we break down some of the most common contingencies.

Most common contingency statuses

Kick out - This means that the seller can kick the current offer out of the way to make way for a better offer. While this isn’t common (or legal in some parts of the country), it can happen if the following contingent status comes into play.

First refusal - This status means that the purchase will not go through if the buyer is unable to sell their current property—usually due to timing issues stemming from the seller wanting to move in a certain timeframe.

First right - First right allows the seller to back out of the current offer if a stronger offer is put on the table that the current buyer cannot match or beat.

The most common contingency clauses

Idaho real Estate

Home appraisal - This contingency protects the buyer, seller, and lender while an independent appraiser determines that the house isn't being purchased for too far above or below fair market value. Offers can be backed out of or altered if the fair market value is too far away from the current offer being considered.

Home inspection - Home inspections are almost always required by the lender (if not by law) to ensure that the home is structurally safe, up to code, and doesn't have any flaws current or imminent that would make it dangerous to live in. If the inspector finds problems (either big or small), that does not mean that the offer is dead. It gives the buyer the opportunity to walk away, alter their offer, or negotiate repairs with the sellers.

Financing and mortgage - When an offer is placed on a house and the seller accepts the offer, they can not accept other offers. However, they can let other offers come in, in the chance that the initial offer is not accepted by the lender or underwriter. If the lender and underwriter find no issues with the offer and buyer’s financing, the sale will proceed and the deal will close.

Clear title - This contingency is often legally required for buying real estate. Like a car title, it is a record of who has owned it and if there are any liens or judgements against it. The title inspection is performed by the title company. If any issues such as unclear ownership or legal issues arise that cannot be easily remedied, the home buying process can be voided. Earnest money will be returned and the home’s contingency will be lifted.

Less common contingency clauses

Sale of current home - Like we mentioned above, sometimes the purchase of a house is dependent on the sale of the buyer’s current house. This is usually to ensure the buyer has the finances to purchase the new property. If the buyer’s home sale falls through, the seller can accept the next best offer in line.

Early occupancy - This contingency is rare. It allows the buyer to live in the home on a rent the property while the home is in escrow. It seems odd to live in a house before you legally own it, but someintes extenuating circumstances warrant this contingency. The buyer will pay the sellers rent, pay for utilities, and renter’s insurance until the deal is fully closed.

Inclusions - This contingency involves keeping some aspect of the house as the current owners have it prior to the sale. This can include large items such as appliances or furniture; down to small things like hose rollers or ornamental garden trellises. Famously in 2008, actor George Hamilton asked the seller—who was a baker—to send fresh-baked cookies to the home for a year as part of the home sale.

Check out homes for sale in Boise, Idaho, both for-sale and under contingency.

 
Posted by AndrewS at 8/22/2020 3:03:00 AM
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Michelle Penick, Boise Idaho Real Estate Agent

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Michelle Penick

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