Is a Contingent Offer Better?
By Jim Palmer Jr.

 There are all kinds of contingencies that can clutter a purchase and sale agreement and many of those are essential to protect both buyer and seller.  But back in the old days when it was a buyer’s market, buyers could get away with all kinds of contingencies that eliminated their risk almost totally. In today’s frenzied-market buyers who still think that way lose out, because they cannot compete.

There are many types of contingencies such as home inspection, well and septic certification, financing, (etc), but when brokers speak of a “contingent offer” that usually means the buyer has a home to sell first.  At first glance, an offer with that sort of a hurdle to cross might seem less attractive to a seller than an offer that only requires bank financing, but in these days, that may not necessarily be the case.

If a buyer must first secure financing, encumbering the subject property with a new loan, there is a great deal of uncertainty especially because it requires an appraisal.  Will it appraise for the purchase price when a bidding war has pushed the sales price well above the level that comparable sales can prove?  Does the buyer really qualify for a loan and can they make up the difference if it does not appraise for enough?

If a buyer has a property to sell, it is very possible that they won’t also need to finance any portion of the sales price.  It’s possible that once the contingent property sells, the buyer will have all cash to plunk down.  No appraisal is necessary in that scenario.  Besides that, the buyer will likely be super motivated to close and less likely to flub because they won’t want to be homeless.  If they are financing the deal, they typically aren’t selling a home out from under themselves and might be more likely to bail out if the financing process gets a little rough.

If you had the choice of a contingent offer against one that requires financing, it seems plausible the contingent offer could be the best choice.  Of course every situation is different and sellers would be wise to consult carefully with their experienced broker.  Times and market conditions will eventually change so that contingent properties languish on the market again instead of selling quickly, but for now contingent offers may be a good choice.