Should you or should you not accept an offer with contingency/contingencies? Most sellers do accept contingent offers – it’s almost inevitable, really, if you want to sell your house within a reasonable time period. But you do need to know what contingencies to expect, how they can affect the sale, and which ones are actually red flags. To help you out, then, here’s our brief guide on how to use contingencies when selling your house inSilver Spring.
Contingencies Explained
As we mentioned, the contingency is an inevitable and accepted aspect of selling your house in Silver Spring. So you should have some understanding of just what this thing is.
Briefly, a contingency is “a provision in a contract that requires the completion of a certain act or the happening of a particular event before that contract is binding.”It is a provision in the sales agreement stipulating that something has to happen in order for the sale to go through.
Typically, the buyer includes the contingency clause in the offer. Then, it’s up to the seller to accept this contingent offer, reject it outright, or come back with a counteroffer that eliminates or alters the contingency.
If you accept a contingent offer when selling your house in Silver Spring, you typically have two resulting options. You “can take [the] property off the market and hope that the condition stipulated in the contingency is met. Or you “can write a kick-out clause into the sales contract that enables [you] to keep their property on the market to see if a better offer comes along. If [you] receive a better offer, [you] must give the original buyer a chance to purchase the property within a specific window of time.”
In most cases, an agent will help sellers facilitate the whole contingency acceptance/rejection process. To discover more about how a Silver Spring agent can assist you, just call (301) 442-2368.
Common Types of Contingencies
The most common types of contingencies you’ll encounter when selling your house in Silver Spring are as follows…
MORTGAGE CONTINGENCY
“A buyer who requires a mortgage to purchase a property may choose to include a mortgage contingency clause in their offer. This contingency will enable the buyer to break the contract and walk away from the deal without losing their earnest money deposit if their financing is delayed or falls through.”
APPRAISAL CONTINGENCY
Lenders will require that a property be appraised before providing financing to ensure that a property is worth at least as much as they are going to lend. But in order not to be on the hook for the difference if the appraisal comes in too low, buyers will include an appraisal contingency in the offer. This will allow them to break the sales contract (without financial or legal repercussions) if the property appraises too low.
INSPECTION CONTINGENCY
“After making an offer, it’s customary to have the home inspected. Sometimes, a home inspection can reveal serious, unexpected issues with the property that may affect the buyer’s desire to purchase the home or willingness to pay the price initially offered. With a home inspection contingency, buyers are provided with the ability to void the sales contract or renegotiate the offer.”
HOME SALE CONTINGENCY
Some buyers will rely on the sale of their current home to be able to purchase a new home, in which case they often include a home sale contingency. “This contingency provides a buyer with a specific period of time to sell their home. If they cannot secure a buyer in that time, and therefore cannot obtain the funds necessary to purchase the new home, they are free to withdraw their offer and recover their deposit without consequences.”
When it comes to home sale contingencies, there are two types you need to be aware of when selling your house in Silver Spring: the sale and settlement contingency and the settlement contingency.
A sale and settlement contingency depends on the buyer selling her current home. It “is used if the buyer has not yet received and accepted an offer to purchase on their current home. In general, this type of contingency allows a seller to continue to market the home to other potential buyers, with the stipulation that the buyer will be given the opportunity to remove the sale and settlement contingency within a specified period (typically 24-48 hours) if the seller receives another offer.”
A settlement contingency “is used if the buyer has already marketed their property, has a contract in hand, and a closing date on the calendar. Because the property isn’t truly sold until the closing takes place, this protects the buyer if the sale falls through for any reason. If the buyer’s home closes by the specified date, the contract remains valid. If the home does not close, the contract can be terminated.”
Home Sale Contingency Considerations
A home sale contingency protects buyers but can be risky for sellers because there’s no guarantee that a buyer’s home will actually sell. And there’s an additional risk in this scenario when you’re selling your house in Silver Spring…
“Even if the contract allows the seller to continue to market the property and accept offers, the house may be listed ‘under contract,’ making it less attractive to other potential buyers. Many people looking for homes will steer clear of a property that is under contract because they don’t want to waste time and risk falling in love with a property they may never have the chance to buy.”
So before accepting an offer with a home sale contingency, you should look into the salability of the buyer’s current home. Here are some of the questions to ask:
- Is it already on the market? In this case, the buyer may not be serious about buying and selling.
- Is it priced correctly? If it’s priced too high (or even too low), it may not sell.
- How long has it been on the market? If it’s been on the market for some time, it may be priced too high or have major problems.
If, however, you’ve been having trouble finding a buyer and your house has been on the market for a while, a home sale contingency may not be such a risky thing. “A contract with a contingency is still a contract and there is a chance that the property will sell. In many cases, it is advisable to limit the amount of time the buyer has to sell a home to one to four weeks. This puts pressure on the buyer to lower the asking price and make a sale while preventing the seller from losing too much time in the event that the transaction does not close.”
A “kick-out clause” will also give you some protection in the case of a home sale contingency. “A kick-out clause states that the seller can continue to market the property and accept offers from other buyers. In this case, the seller gives the current buyer a specified amount of time (such as 72 hours) to remove the home sale contingency and continue with the contract. If the buyer does not remove the contingency, the seller can back out of the contract and sell it to the new buyer.”
Best Way to Use Contingencies When Selling Your House in Silver Spring
When it comes to selling your house with a contingent offer, a careful review of the offer is an absolute must. You simply have to be sure you’re not giving up too much and/or taking too great a risk. An experienced Silver Spring agent can help you analyze offers and make the best choice. To take the risk out of selling your house in Silver Spring, contact us today at (301) 442-2368.