What Does Contingent Mean When Buying a Home?
The Definition of Active Contingent
The true definition of a home that is active contingent is that the home has an offer on it, but the buyer has contingencies on their offer. In other words, the buyer can still back out of the deal if the factors that the sale is contingent upon don’t work out in their favor.
The most common contingencies on a purchase contract include:
Financing contingency – The buyer has a specified period to get their financing in order or they can back out of the contract.
Appraisal contingency – The buyer can make the sale contingent on the appraised value of the home. If the appraised value isn’t at least as much as the accepted offer, the buyer can back out of the deal.
Inspection contingency – If the inspector finds problems with the home, the buyer can either renegotiate with the seller or back out of the sale completely.
Sale of home contingency – If the buyer has a home to sell, they can make the purchase of the new home contingent upon the sale of their home by a specified date.
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Can You View Active Contingent Homes?
Just because you can view active contingent homes, doesn’t mean you will be able to buy them. If the original buyer is able to clear all of the contingencies, the home changes to pending status and is no longer active. But in the meantime, sellers can still show the home. Some choose to show it, while others don’t show it. It is really up to the seller.
If the seller does show the home, they have one more decision to make. Do they accept ‘backup offers’ or not? If they do, you are free to make a bid. The seller will keep the offer as a backup, should the original contract fall through due to a contingency. In fact, you can make backup offers all the way through the pending status until the home actually sells.
The Best Way to Look for a Home
If you want to avoid the craziness of viewing active contingent homes and putting in backup offers, you need to know when homes are listed right away. A real estate agent has the most up-to-date information of homes listed in the MLS. He/she can notify you of homes that pop up that meet your expectations and price range. It’s up to you to set up an appointment with your realtor to go see the home and then make a decision on what you would like to do.
The best thing you can do is bid on a home that doesn’t have a contract on it. This way you can put your bid in and have it accepted or rejected. Maybe you will be in a bidding war, but you aren’t the ‘backup offer.’ You still have the chance to negotiate with the seller and send in counter-offers to try to win the bid.