How Often Do Contingent Offers Fall Through?

Contingent offers refer to selling an asset or property through a contract contingent upon fulfilling agreed-upon conditions. They are most commonly used for real estate sales. The offer becomes a binding contract when it is accepted and the conditions are fulfilled. Contingent offers protect the buyer if the seller fails to close the deal. The buyer does not incur any financial loss if the sale falls through.

Hiring professionals to help you understand the legalities of the offer and prepare the contract can save you from costly mistakes. Real estate is a complicated industry, and a realtor or lawyer can help you avoid legal issues during the sale. A contingent offer sets out certain conditions that must be met before the buyer can purchase the property. Real estate companies often specialize in contingent purchasing offers and can help you draft a contract depending on your needs.

So, how often do contingent offers fall through? Only about four percent of contingent offers fall through.

1. How Contingencies Can Impact the Deal

A contingent offer is a contract that elaborates on the subject of purchase and sale. It protects the buyer from losing their deposits if the deal falls through. Real estate professionals can assist buyers in comprehending the conditions stipulated in a contract. One common example of a contingency clause is: "If and when the buyer acquires financing," which means the offer is subject to approval from a lender. This clause is used when the buyer wants to purchase a house and has already found a lender. Before signing the contract, the lender may ask for some time to review the documents related to the property. The contingent offer becomes a binding contract if and when the lender approves the property.

Contingent offers allow you to walk away from a deal without any financial loss if you find the buyer unable to meet their promises. They also protect the buyer from getting into a deal they cannot afford or that does not meet their level of satisfaction. Sellers benefit from contingent offers because they can have some control over their property sale.

2. Common Reasons for a Contingent Offer

How often do house contracts fall through? If you can't sell your home and don't have a buyer in mind, you may need a realtor to help you facilitate the sale, which is when contingency agreements come into play. Contingencies can protect you from getting tied to a bank-approved buyer who isn't reliable. You may also want to use contingencies if the buyer still needs a mortgage. This will protect you in case the buyer can't secure mortgage approval by the due date.

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3. Types of Contingent Offers

Financing Contingencies

Financing contingencies depend on the buyer securing a mortgage from a lender. These contracts are popular when the buyer needs more cash to purchase the house. They're also helpful for sellers who do not want to spend time trying to sell their properties. How often do closings fall through? Financing contingencies protect the seller from losing time waiting on a buyer, while also protecting the buyer from losing earnest money if they can't secure financing.

Inspection Contingency

Buyers often worry about hidden property problems when making an offer on a house. This is where a home inspection contingency can help. Inspection contingencies depend on the seller providing a property inspection report. The seller must also give the inspector access to all the credentials needed to detect any problems with the house.

Title Contingency

During real estate transactions, buyers often want to confirm that the title belongs to the seller through a title contingency. In this case, a contingent offer will fall through if a buyer wants to purchase a house but the seller's name isn't on the title. A good real estate company will advocate for you to have this contingency clause in your contract.

Appraisal Contingency

An appraisal contingency states that the buyer must pay a fair market amount for the property. This prevents the buyer from purchasing the house at a low price and reselling it at a higher price. The appraisal contingency ensures the seller gets full value for their home by requiring a professional appraisal.

Home Sale Contingency

In a home sale contingency, the real estate transaction depends on the sale of the buyer's home. Many buyers want to purchase a new home but first need to liquidate the equity in their current home. This is when a home sale contingency comes into play. The transaction moves forward if the buyer's house sells by a specified date.

First Right of Refusal Contingency

When a seller agrees to a contingent offer, they give the buyer the right to first refusal. This means the property can't be sold to any other potential buyers until the first buyer makes a final decision. If the buyer chooses to purchase the property, the contract becomes binding. If the deal falls through, the buyer remains protected from losing their money.

Kick-Out Clause

A kick-out clause allows a seller to show their house to other interested buyers after accepting a contingent offer. This clause allows the seller to shop for other buyers to attract a non-contingent offer. If the seller receives a non-contingent offer, the initial buyer can remove their contingencies and move forward with the sale or back out of the deal. If the first buyer declines the sale, they will not lose any money, and the seller will enter into a non-contingent contract with the new buyer.

4. Pending vs. Contingent

Contingent means the seller has accepted an offer but has yet to sign a contract because certain conditions be met first. The deal could still fall through. Pending, however, means all contingencies have been satisfied, and the sale is moving forward. Read more about pending vs. contingent offers here.

5. Should You Try to Avoid Contingencies?

A contingency clause is an important part of a contract, but there are times when you should consider avoiding it. Contingencies can scare off potential buyers, weaken your offer, or put you in a worse position during negotiations. However, contingencies can also protect you from financial loss. The real benefits come in cases where the buyer or seller is unreliable. Contingency clauses can protect your interests if used properly. You should always consider the pros and cons of contingencies when selling a house.

Putting your home up for sale requires you to make some big decisions. There are several factors to consider before you begin the process. One is whether to apply for contingency offers or not. This is a difficult decision, and a professional real estate agent can help you evaluate all the factors and make an informed decision.

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