When negotiating a real estate transaction, you may come across properties in various states of activity. You may be wondering: what does contingent mean in real estate? Knowing the differences between the two can help you identify properties that are still available for purchase. In this article, we’ll discuss the different definitions of contingent in real estate and what they mean. Read on to learn more! Here are some of the most common examples of contingent status in real estate.
Right of First Refusal
One common real estate contingency is the right of first refusal, which gives the first buyer the option to purchase the home. When the first buyer decides to reject the home, he or she has 72 hours to withdraw the contingency and find another buyer. This is also known as a “kick-out clause” and is common on MLS boards. In real estate, a contingent period can add a few weeks to a sale.
Another example of a contingency in real estate is a backup offer. A backup offer requires earnest money. A seller may use this as a tactic to pressure a buyer, or as a means to keep the buyer from bidding on the original deal. It’s best to discuss the nuances of contingent status with your real estate agent. However, keep in mind that a contingent offer could mean a home stays on the market for a long time.
Escrow Deposit at Stake
If a buyer removes a contingency from a real estate transaction, they put their good faith deposit on the line. Known as the “escrow deposit,” this money is put at risk by the buyer. Moreover, the seller considers the removal of a contingency as an enormous hurdle to overcome, and will not entertain the new offer if it doesn’t meet these conditions. This is an extremely common tactic in real estate transactions.
Sellers may accept a sale contingent offer, but must be certain that the buyer is qualified and has the cash to close. It’s essential to remember that a sale contingent offer does not guarantee a sale, and a buyer who refuses to accept one may be looking for another home that is more suitable for them. It’s a wise move to ask your agent for a waiver before making an offer.
Also Read : What Does Under Contract Mean in Real Estate?
Decoding San Diego Real Estate
In San Diego real estate, contingent status means the seller is willing to accept less than what is owed on the mortgage. When a home is in this status, real estate agents may still list it as “active under contract,” as they fear the contract will not be solid. It’s important to understand the differences between contingent and pending status, as the latter does not mean the buyer won’t be able to raise the offer.
When buying real estate, a buyer can request a mortgage appraisal to protect themselves against any risk. A mortgage lender typically requires that the buyer have a mortgage appraisal before closing, which will ensure the property’s value is above the asking price. The buyer can then cancel the contract without losing their earnest money. If this doesn’t happen, the seller can recoup the money without losing the buyer’s earnest money.