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What is a Contingent Offer (When Buying a Home)?

There can be a lot of terms used in real estate transactions that you may or may not be familiar with. There are also a whole host of scenarios, and no two transactions are the same. Have you ever heard the term contingent offer when buying a home? If you aren't sure what it means, you're not alone.

According to an article by, "A contingent offer means that an offer on a new home has been made and the seller has accepted it, but that the final sale is contingent upon certain criteria that have to be met. These criteria, or contingencies, are clauses in a sales contract that typically fall under three major categories: appraisal, home inspection, and mortgage approval." Contingencies are used in real estate offers to protect the buyer in the event that something goes wrong, and without losing their earnest money. So what are the three above mentioned types of contingencies?

  1. Home Inspection Contingency: This contingency is written into almost every buyer offer. This allows the buyer the opportunity to have a professional inspection completed on the home. This allows the potential buyer the opportunity to discuss certain repairs with the seller in the event that something is wrong before proceeding with the purchase. Options include negotiating repairs with the seller, reducing the purchase price or the buyer backing out of the sale.

  2. Appraisal Contingency: This is one contingency that we have seen a significant shift at least in the Austin market. Where this contingency used to be standard, in order to make their offers more competitive, some buyers are choosing to waive this contingency and pay cash for the difference if the home does not appraise. According to the article, "With this real estate contingency, a third party hired by the mortgage lender evaluates the fair-market value of the current home for sale. In the event that the appraised value proves to be less than the sale price, the appraisal contingency lets you back out of the deal."

  3. Mortgage Contingency: This contingency is in place to protect the buyers and sellers from entering into a transaction without having the proper funding in place. With the mortgage contingency, the buyer has a specific amount of time to obtain a loan that will cover the mortgage. This protects the buyer in the event that they can’t get a lender to commit to a loan - it gives them the right to walk away from the sale with their down payment. One recommendation for all buyers, especially in today's competitive market, is to obtain pre-approval from a lender. This can make your offer stand out and help expedite the loan process once you have an accepted offer in hand.

If you are in the market to purchase a home, it is always advised to discuss any and all contingencies and potential contingency waivers with your REALTOR®. You can reach us at 512-423-6782 or!


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