The simple answer is: an offer to purchase a home that the seller has accepted, but won’t be finalized until certain conditions are met. That’s the comprehensively brief explanation. But what’s worth digging into are the kinds of contingent offers you may come across as a buyer or seller. Here are some of the most common scenarios:
Home Inspection
If a buyer is pretty certain they’ve found their dream home but wants a professional opinion to be sure everything is shipshape, this is what they’ll do. It allows the opportunity to have a home-to-be properly inspected by an expert before they agree to spend money.
Mortgage
If a buyer wants to claim a home before they secure a mortgage for it, this is how they do. If the seller agrees, the buyer then has time to search for a proper mortgage without worrying someone else will swoop in and buy the place before they can.
Current Home Sale
For a someone buying a new house, rather than a first house, this is a pretty standard contingency. Most people won’t get rid of their current home until they’re sure they have a new one to move into. This setup allows people to secure their next home but delays official payment until they’ve sold their current one.
Appraisal
The final sale in these cases hangs on the assessment of the home conducted on behalf of the mortgage lender. This may sound similar to a home inspection contingency. But it’s conducted by a third party to insure that both the potential buyer and the seller get a fair deal.
Other Scenarios
There are a variety of reasons why an offer might be accepted on a contingent basis before a sale is finalized. Certain legal issues may require sorting or arbitration. Zoning matters may need to be clarified. Or the interested parties may wish to review fully the title before money changes hands. Whatever the reason, a contingent offer is fairly common practice during the sale/purchase of a home.