Eliminating Stringent Contingencies: How to Make a Contingent Offer Stronger
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Summer Rylander, Contributing AuthorClose
Summer Rylander Contributing AuthorSummer Rylander is a freelance writer and editor with an abundant background in real estate. A former residential real estate agent in the Columbia, SC area and sales administrator at a commercial real estate firm, she now uses this experience to help guide readers. Summer currently resides in Nuremberg, Germany, where she fulfills her passions of food and travel and avoids her dislikes of mayonnaise and being trapped in an office.
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Alexandra Lee, Associate EditorClose
Alexandra Lee Associate Editor
Alexandra is an associate editor of HomeLight.com. Previously, she served as a writer and social media manager at Santa Barbara Life & Style Magazine, in addition to interning at the nonprofit honors society Phi Beta Kappa. Alexandra holds a bachelor's degree in communication and global studies from UC Santa Barbara, and she has three years of experience reporting on topics including international travel, luxury properties, celebrity interviews, fine dining, and more.
Putting in an offer on a home often feels like walking a tightrope between protecting yourself and standing out in a competitive market. Buyers want the safety net of certain conditions in their contract, but they also know those same protections can make a seller think twice. At the same time, going in without those safeguards can feel like a gamble when so much money is on the line. That push and pull is exactly where a contingent offer comes into play.
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In this post, we’ll review what a contingent offer is and run through a common contingency scenario with the help of Marc Lagrois, a real estate agent based in Rochester Hills, Michigan. We’ll explore what buyers can do to help strengthen a contingent offer and secure a spot at the closing table.
What is a contingent offer?
As the term implies, a contingent offer is basically a home purchase offer that only moves forward if certain conditions are met. Since buying a home is a big deal, those conditions (called contingencies) are added into the purchase agreement to protect the buyer. Most of the time, there’s also a set timeframe to check off those requirements so the deal can keep moving toward closing.
Contingencies can range from the relatively minor or otherwise workable, like requesting a $3,000 allowance to fix a plumbing issue that was revealed during inspection, to more serious stipulations, such as a buyer needing to sell their existing house before closing on the next.
Negotiable contingencies
When you’re making an offer on a home, not every contingency has to be treated as a strict rule. Some of them can actually be adjusted or negotiated depending on how competitive the market is and what the seller is willing to accept. Knowing which protections you can be flexible on can help you craft a stronger, more appealing offer without giving up more than you need to.
Home inspections
A home inspection contingency lets the buyer back out of the deal or renegotiate if substantial issues come up during the home inspection.
While widely considered a best-practice move when purchasing a house, home inspections have some wiggle room.
Cash buyers sometimes skip the inspection process to speed things up, while other buyers may choose to waive their inspection rights or agree upfront to limit repair requests. It’s often a strategic move to make their offer more appealing to the seller and keep the deal competitive.
Home appraisals
When you use a mortgage to buy a home, your lender will need to order an independent appraisal to evaluate what it’s worth. That’s why financed offers come with appraisal contingencies.
The loan can’t be cleared until the home has been appraised and the lender knows they’re not lending you too much for the home. If the appraisal comes in low (that is, the home is worth less than your offer amount), it can put your deal with the seller at risk.
It’s difficult to fully circumvent the appraisal process when financing is involved, but these numbers aren’t necessarily a dead end.
“I’ve seen buyers guarantee or partially guarantee the appraisal,” says Lagrois.
“If they’re offering a really high price, maybe even a little over market value, they realize they’re going to have to do something to protect the seller from the possibility that the appraisal will come in low.”
In these cases, buyers make up the difference between the purchase price and the appraisal with cash.
Buyer financing
Unless you’re paying cash for a house, your best course of action is to include a pre-approval letter from a mortgage lender with your offer. This indicates to the seller that you’ve been qualified to secure funding, and proves that you’re serious about buying since you’ve already gone to the trouble of talking with a bank.
That being said, pre-approvals aren’t yet a guarantee of funds, and they usually carry an expiration date. Plus, you’ll want to include a mortgage contingency in your purchase contract, which states that the home loan has to clear before the deal can close.
Can a financing contingency be negotiable? If you’re obtaining traditional financing, waiving the financing contingency can put your earnest money deposit at risk.
One way around a financing contingency could be to apply for a bridge loan or use a service like HomeLight’s Buy Before You Sell, which allows you to make a non-contingent offer on your new home by unlocking the equity in your current home.
Sales contingency
Needing to sell your house before you can close on your new home is a very common situation, but for the seller of your intended next property, this is a risky scenario. If something jeopardizes your sale, then their deal with you is now also at risk.
Adding a sales contingency means you’re asking the seller to wait for you to sell your current home before the deal can move forward. If the seller is also trying to buy their next home, that extra uncertainty can feel risky. That’s why they’ll often prefer a cleaner offer without a sales contingency. We’ll dig more into how to navigate this contingency shortly.
Settlement contingency
A settlement contingency is similar to a sales contingency, but in this case, you’ve already found a buyer for your house, and you’re just waiting to close. Writing this contingency into your offer usually involves specifying a certain date by which your sale will be settled, whereupon you can move forward with your next purchase.
Should the sale of your current house fall through or even just get delayed, the seller of your would-have-been home can put their property back on the market if you can’t renegotiate a closing date.
Non-negotiable contingencies
Even in a competitive market, there are some contingencies buyers really shouldn’t give up. These are the protections that help you avoid walking into a deal that could cost you more than you expected. Knowing which ones to keep in place can help you move forward with confidence while still making a strong offer.
Title and lien contingencies
Review the detailed settlement document provided by the closing attorney, and you’ll see a line item for a property title search. This element of research is done to ensure that the person selling a house is indeed the legal owner of the property with full rights to sell.
If a title search reveals any claims to or liens against the property, the transaction will be delayed until it can be resolved. Claims most often arise from family disputes or divorce proceedings, while property liens can be tied to debts owed to contractors, unpaid taxes, bankruptcy, and more.
Zoning and land use contingencies
If you’re buying a property that’s currently used as a home and you plan to keep using it as a residence, zoning contingencies usually aren’t a major concern. However, changing how a property is used often requires official approval and permits. These approvals go beyond what a buyer and seller can simply agree on between themselves.
Short sale or bank approval contingencies
If you’re purchasing a home that is considered distressed or is otherwise bank-owned, you’ll find far less room to negotiate the fine points than if you were working directly with a private seller.
Court approval contingencies
Like claims against property titles, contingencies requiring the approval of a court to move forward occur most frequently in cases of divorce settlements and estate sales.
Sweetening the deal when a contingent offer is inevitable
Now, let’s hone in on the common contingency of selling your current home to buy your next property. When you’ve found the home of your dreams in a competitive market, how can you make your offer as enticing as possible to a seller who is likely fielding offers left and right?
“If you’re writing an offer that is going to be contingent on the sale of your home, you have to show that you’re serious about getting that house sold,” says Lagrois. “You have to demonstrate that it’s priced to sell and that it’s going to be marketed effectively.”
This scenario is when it’s especially helpful to have a seasoned real estate agent in your corner. Since the agent helping you buy your next home is also likely to be the agent selling your current property, it’s important to work with someone who has the experience to anticipate needs and field concerns on both sides.
“A smart agent is going to be able to demonstrate that their buyer is very serious,” Lagrois says of the offer-writing process. “An inexperienced agent is going to have a tough time navigating through that kind of deal.”
Be more creative in strengthening your contingent offer
So you’ve found a great agent, they’ve helped you price your home appropriately, and together you’ve created a solid, provable marketing plan. Now what?
As the old saying goes, money talks. Coming in with an offer that is at or over the asking price is one way to grab the seller’s attention. From there, consider using a little creativity to sweeten the deal.
“I’ve seen buyers doing things like offering free occupancy after closing to make their offer more attractive,” notes Lagrois.
While most home sales require the seller to have vacated the property by closing day, offering extended occupancy through a rent-back agreement allows a buffer of additional time before the seller has to be out. This can work to the advantage of both parties by alleviating time pressure to pack up and move, so consider keeping this handy tool in your negotiation arsenal.
Another uncommon but potentially helpful option is to offer to write a kick-out clause into your contract for the seller. This means that the seller retains the option to accept a better offer if one comes in while their transaction with you is still in progress.
If this sounds risky for you, that’s because it can be. But if you’ve fallen head-over-heels for a particular home to the point where you’re willing to offer a kick-out clause, build in protection for yourself and be sure that the verbiage includes a first right of refusal for you as the buyer.
This means if the seller wants to accept another offer, you’ll have up to 72 hours to remove some contingencies from your contract so that it’s more attractive to the seller and you can still move forward with the purchase.
Still feeling stuck? Let HomeLight Buy Before You Sell lend a hand
For ultimate buying power, consider using HomeLight’s Buy Before You Sell to purchase your next home. As noted above, sellers prefer offers with few or no contingencies. With HomeLight Buy Before You Sell, we give you a back-up offer on your home, allowing you to make an offer without a sales contingency, which makes your offer more attractive to sellers.
Here’s what you can expect to happen when you use Buy Before You Sell:
- Unlock your equity: Tell us a little bit about your situation, and we’ll help you unlock a portion of your equity as quickly as a few hours later. We’ll tell you how much you can access based on factors like your home value, outstanding loans, and your financials.
- Use your funds: You can put that equity toward the down payment on your next home, moving expenses, closing costs, or property repairs.
- Make a strong offer: Now, you’re ready to go out and make a non-contingent offer on your dream home. In competitive markets, this can be a game-changer.
- Sell your existing home: We’ll work with a top HomeLight agent to list your vacant home on the market to attract the strongest offer possible. Having already moved out, you won’t have to worry about selling a house that you’re still trying to live in.
It takes only a few minutes to find out if your home is a good fit for the HomeLight Buy Before You Sell. There’s no cost or obligation to apply. With our innovative equity unlock calculator, you can be approved in 24 hours or less. Once approved, you can submit a strong offer with no home sale contingency. Then, you can sell your existing home with more peace of mind, and possibly staged strategically, earning more from the sale.
Buy First, Sell Smart
Trying to line up buying a new home while selling your current one often forces buyers to rely on risky contingencies or complicated timing. Use HomeLight’s Buy Before You Sell program to unlock your equity and make a stronger, contingency-free offer with confidence.
The road to the closing table
No matter how you choose to navigate your contingent offer, remember the importance of transparency and urgency. When a seller has accepted your thoughtful (and perhaps rather clever) offer, it’s time to kick into overdrive and get things done.
“Buyers have to be willing to move forward with their due diligence right away,” says Lagrois. “Sitting around and waiting is definitely not in anybody’s interest.”
Frequently asked questions (FAQs) about contingent offers
When a home is marked as “contingent,” it means the seller has accepted an offer, but the deal still depends on certain conditions being met. These usually include things like financing approval, inspections, or the sale of the buyer’s current home. The property is essentially under contract, but it’s not fully sold yet. If those conditions aren’t met, the deal can still fall apart.
Yes, sellers can usually accept backup offers even when a home is under contract. A backup offer basically sits in line in case the first deal doesn’t go through. It gives the seller a safety net without breaking the original agreement. If the first buyer walks away, the backup offer can move into first position.
Contingent deals can fall through for a few common reasons, like financing issues, low appraisals, or problems uncovered during inspections. Sometimes, buyers also run into delays or changes in their financial situation that make it harder to close.
While not everything can be prevented, being prepared and responding quickly to issues can help keep things on track. Working with an experienced agent can also make a big difference in catching problems early.
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