The Return of Contingencies and How to Take Advantage of Them

In a shifting real estate market, the re-emergence of contingent transactions and contingency clauses can indicate the balance of power among parties involved in a transaction.

Real estate sales are up, but the notion that buying a home is one of the best ways to build wealth can be misleading. An analysis by the National Association of REALTORS® shows that 5.64 million existing homes were traded hands in 2020 — but the process isn’t always straightforward, especially when no certainties are involved.

What Does Contingent Mean In Real Estate and WHY does it matter?

There is a common misunderstanding between a contingent and a contingency clause. A contingency clause is essentially a clause that says “if [this or that happens], then [this or that happens].”

A great example of this type of clause is loan contingency, which states that if you cannot obtain a loan, then you have an option to terminate or work through a solution. You’ll see the same concept with an inspection contingency: If the inspection is not to a buyer’s liking, then the buyer has an option to terminate the contract or work with the seller toward an amicable solution.

Real Estate Contract and Deal Analysis: The Domino Effect

When you make an offer on your dream home, it can be stressful—after all, it’s likely the biggest purchase you’ll ever make until you buy another house. There are safeguards in place when you make an offer in the form of contingencies that protect you as you move through the home-buying process. However, there are also drawbacks if the seller chooses not to accept an offer from them.

As the market shifts, contingent property offers and contingencies will appear in response to changing conditions. This is a sign of the current market’s ability to respond to shifting conditions.

Agents at FairLead can help you find the right home, ensuring you have all the information needed to make an informed decision and guide you through the process.

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