Buying A Home: Contingent vs. Non-Contingent Offers

What is a contingent offer?

A contingent offer is when, as a buyer, you're relying on funds from your current home sale in order to purchase the next home. The new home purchase is contingent on the old home sale.

What are the 2 types of CONTINGENT offer forms in the NWMLS?

If your home has not been listed yet, or is listed but not under contract, then we would use form 22B. If your home has been listed and is under contract, then we would use the form 22Q. Submitting a pending property contingent offer is going to be much stronger, as the seller will see you are much closer to being sold and having your funds.

What are NON-CONTINGENT offers and why are they BETTER?

A non-contingent offer is stronger because the seller can see that we are free to buy their house without the hurdle of having to sell yours. Being contingent on your home's sale throws a big wrench in the negotiations before we can even approach the topic of offer price or terms. The size of the wrench does depend on the type of home, current market conditions, and anything else suggesting how quick or easy the sale will be. If it's a beautiful remodeled home in a sought-after area where the comps support a strong presence of buyers, it's significantly easier to convince the sellers that it's a low risk to sell to us with our contingent offer.

Instead of scaring sellers with whether or not YOUR home will sell, we're able to solely focus on getting you the best price and terms.

What is a CONTINGENT NON-PENDING OFFER, and why is it WEAK?

Although it's not very common, there are some sellers out there that won't even entertain a contingent offer. The seller also has the right to continue marketing their property for sale while it is under contract as "contingent" with you. If they receive an offer during the contingency period that they'd like to accept, they're able to utilize the "bump period" (number of days given to the buyer to decide to waive or terminate transaction) and force us to waive the contingency or terminate the transaction, in which case your earnest money would be returned to you.

We're also limited, although not by much, on what kind of offer we're able to accept for the sale of your home. If the offer we receive is ALSO contingent, we need consent from the seller in order to accept. If the closing date for the offer we receive is less than 30 days or over 60 days, we need consent from the seller in order to accept. IF we do accept an offer that falls under either category above, then we have defaulted and the sellers have 3 days to terminate the agreement to sell you their home AND keep the earnest money.

The advantage is that you're able to still submit an offer while working on getting your home sold. But again, even if it's accepted, it's still not guaranteed to go through as you can be bumped.

What is a CONTINGENT PENDING offer?

This is the next best thing when it comes to noncontingent offers. Still not as strong as a non-contingent offer, but it does secure the listing in that the sellers are NOT able to receive any back up offers like they can in the contingent non-pending situation. It also allows us to have flexibility on the closing date and have the potential for a simultaneous close, meaning you close on the sale of your old home and the purchase of the new home at the same exact time.

In the event that your home sale falls apart through no fault of your own, the transaction terminates and the earnest money is returned. Or, we can submit the notice that the pending sale fell apart in conjunction with a notice of waiver for the home sale contingency. However, doing so will waive ALL OTHER CONTINGENCIES in the offer, so must not be done lightheartedly.

This is a lot to digest and consider carefully. I am here to discuss your questions or concerns.