The real estate market can be a confusing and overwhelming place. This is especially true if you’re not familiar with all the terminology. One term that is becoming increasingly important in the world of real estate is “contingent offer.” But what does this term mean, and how does it affect you as a buyer or seller? As a real estate agent, I’m here to break it all down for you and provide you with the tools you need to succeed in this competitive market.
What is a contingent offer?
First things first, what exactly is a contingent offer? Simply put, a contingent offer is an offer to buy a home that is dependent on certain conditions being met. These conditions can vary depending on the specific circumstances, but they usually involve the sale of the buyer’s current home. The other common contingency is for the buyer to obtain financing for the purchase. Essentially, a contingent offer means that the buyer is saying, “I want to buy your home, but I need to meet these conditions first.”
What does a contingent offer mean for a home buyer?
Now, let’s talk about what this means for you as a home buyer. If you are looking at a property and you know that you will need to make a contingent offer, it’s important to understand that this can make your offer less attractive to the seller. After all, they want to sell their home as quickly and easily as possible, and a contingent offer can introduce uncertainty and potential delays into the process.
However, that doesn’t mean that you should be discouraged from making an offer. Sometimes a contingent offer may be the best option for your specific situation. In many cases a seller may be willing to accept a contingent offer if they believe that the buyer is serious and committed to the purchase. It’s all about communicating effectively with the seller and making sure that they understand your circumstances. Your agent should be able to help here.
Have A Backup Plan
If you are making a contingent offer, you should have a backup plan. This is for the not-so-rare event that the conditions of the offer are not met. For example, if you are relying on the sale of your current home to finance the purchase of a new home, you should have a plan in place in case your current home doesn’t sell as quickly as you anticipated.
What does a contingent offer mean for a home seller?
Now, let’s shift gears and talk about what it means to be a seller who is receiving a contingent offer. If you are selling your home and a buyer presents you with a contingent offer, you may initially feel hesitant. However, there are many factors you need to consider when determining the strength of the contingent offer.
Your real estate agent should be your most important resource here. They can often help you by obtaining more information and advise you on what it means. Such as with a home sale contingency. In this scenario, the agent can likely obtain the contract that your buyers are using to sell their home. This way he can determine how likely and quickly your buyer’s home will sell. If it’s overpriced and been listed for 60 days, you may want to proceed with caution. On the other hand, if the home is price right and is getting a lot of traffic or offers, it would then be a stronger offer.
Have A Backup Plan
If you are selling your home to a buyer with a home sale contingency, make sure to accept a backup offer/s. Having at least one backup offer can put pressure on the buyer to make sure his home closes, and on time. But it can also serve as a safety net. In the event that your buyers contract falls through, you will have another offer to quickly take its place. Even if the backup is not as good as the initial offer, it still may be more beneficial than re-listing your home.
It Is Still A Offer
It’s important to keep in mind that in some cases, a contingent offer can actually be a good thing for sellers. For example, if your home has been on the market for a while and you haven’t received any offers. In this case, a contingent offer can provide some much-needed momentum and interest in your property. You may be able to use that offer to improve the terms or price of other offers. Additionally, if you are planning to buy a new home after selling your current one, accepting a contingent offer can provide some certainty and peace of mind in terms of timing.
How do contingent offers apply in Colorado specifically?
Now, let’s talk about how this all applies to the state of Colorado. In Colorado, contingent offers are a common part of the real estate landscape, especially in a hot market like Denver. As a result, it’s important to have a good understanding of what a contingent offer entails and how it can affect the buying and selling process.
It Must Be Clearly Stated
One thing to keep in mind is that Colorado law requires that all contingencies be clearly stated in the purchase contract. This means that both the buyer and the seller should have a clear understanding of what conditions must be met for the sale to go through. Additionally, Colorado law also requires that any changes to the contract be agreed upon in writing by both parties.
Home Sale Contingency
In terms of specific contingencies, there are a few that are particularly common in Colorado. One is the “home sale contingency.” A home sale contingency is when the buyer’s offer is dependent on the sale of their current home. This can be a common condition in a hot market like Denver, where many buyers are looking to sell their current homes before purchasing a new one. If the offer has a home sale contingency, it should be clearly marked on the buyers contract. It is found under the Conditional Sale Deadline. This is the date that the buyer must sell their current property buy unless it states otherwise.
Another common contingency in Colorado is the “appraisal contingency.” This is when the buyer’s offer is contingent on the home appraising for a certain value. For example, lets say you are purchasing a home using financing. The contracted price is $450,000 but when your lender gets the appraisal, it appraises at $425,000. You, as the buyer, can now back out of the contract or renegotiate the terms. Read more about this Appraisal Gap Contingency by following the link.
Overall, whether you are a buyer or a seller, it’s important to have a good understanding of what a contingent offer is and how it can affect the real estate process. As a real estate agent, my goal is always to help my clients navigate the buying and selling process with confidence and ease. So, if you have any questions or concerns about contingent offers, reach out to me! I’m always here to help!