Should you or should you not accept an offer with contingency/contingencies? Most sellers do accept contingent offers. They are the norm, not the exception when selling your home. Especially, 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 in theWestfield, Cranford, Clark, Scotch Plains, Fanwood and Mountainside Areas.
Contingencies Explained
As we mentioned, the contingency is a common and accepted aspect of selling your house in Westfield, Cranford, Clark, Scotch Plains, Fanwood and Mountainside Areas. So you should have some understanding of what to expect.
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.
In New Jersey the buyer includes any contingencies clauses 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 Westfield, Cranford, Clark, Scotch Plains, Fanwood and Mountainside Areas, 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.”
We can assist in understanding the pros and cons of various contract contingencies. You can find out more about how we can help you in the Westfield, Cranford, Clark, Scotch Plains, Fanwood and Mountainside Areas just call 917-608-7277.
Common Types of Contingencies
The most common types of contingencies you’ll encounter when selling your house in Westfield, Cranford, Clark, Scotch Plains, Fanwood and Mountainside Areas are:
MORTGAGE CONTINGENCY
A buyer who requires a mortgage to purchase a property will 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.” This is the most common contingency you will see. The alternative is a cash buyer.
APPRAISAL CONTINGENCY
Lenders will often require that a property be appraised before providing financing to ensure that a property provides adequate collateral for the loan. 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. We are seeing this contingency routinely waved in our current market. Home prices have risen rapidly and in some cases, appraisal values haven’t caught up with current pricing.
INSPECTION CONTINGENCY
After making an offer, it’s customary to have the home inspected. A home inspection may 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. The home inspection contingency provides buyers with the ability to void the sales contract or renegotiate the offer. Typically buyers will furnish inspection reports then sellers can negotiate possible home repairs or provide a credit as an alternative.
HOME SALE CONTINGENCY
Many buyers will rely on the sale of their current home to be able to purchase a new home. This is when a buyer will 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.”
There are two common types of home sale contingencies you should understand when selling your house in Westfield, Cranford, Clark, Scotch Plains, Fanwood and Mountainside Areas: 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 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. This contingency is uncommon in this real estate market.
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. A marketed and “sold” property is a much less burdensome contingency than the latter.
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 Westfield, Cranford, Clark, Scotch Plains, Fanwood and Mountainside Areas…
A home that has been place “under contract continue to show” is less attractive to other potential buyers. Many people looking for homes will skip a home 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? No? 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 you accept a sale and settlement contingency you should 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 Westfield, Cranford, Clark, Scotch Plains, Fanwood and Mountainside Areas
When it comes to selling your house with a contingent offer, a careful review of the offer is essential. You need to be sure you understand the contingencies and are limiting your risk. As an experienced Westfield, Cranford, Clark, Scotch Plains, Fanwood and Mountainside Areas agent we can help you analyze the offers and make the best choice. For more information on contingencies when selling your home in the Westfield, Cranford, Clark, Scotch Plains, Fanwood and Mountainside Areas, contact us today at 917-608-7277.
If you would like to learn more about the entire home selling process request my Home Seller’s Guide to Success.