The top reasons for contract termination recently include the buyer lost their job (28% \u2014 a higher-than-normal cause due to COVID-19), issues related to obtaining financing (21%), home inspections (17%), and other contingencies stated in the contract (7%).<\/p>\n
In previous months, however \u2014 prior to the impact of the pandemic \u2014\u00a0NAR has reported that terminated contracts only represented 2%<\/a> to 5%<\/a> of deals in a given month. So based on these numbers, you could reasonably conclude that a real estate contract has anywhere from a 1%-10% chance of falling out of contract, which means the odds of settlement are pretty good even in uncertain times. It\u2019s far more likely that your contract will get delayed and still close, NAR\u2019s data consistently shows.<\/p>\n But any risk when you\u2019re selling your home is a bad thing.<\/p>\n For an in-depth analysis of how often contingent offers fall through, we\u2019ve rounded up additional relevant stats and consulted top real estate agent Liz Donnelly<\/a>, who closes 17% more sales than the average agent in Ventura, CA. We\u2019ll explain the riskiest contingencies and what you can do as a seller to protect your sale.<\/p>\n Contingencies<\/a> are legal clauses stating that certain requirements must be met for the contract to close. Contingencies mostly protect the buyer\u2019s interest, allowing them to exit the contract with their earnest money<\/a> if they cannot fulfill the stated requirements. Here\u2019s a rundown of the most common contingent offers and how likely they are to fall through:<\/p>\n \u201cPicture yourself five days before your closing, when you’ve already paid $X amount of money for your moving van, or even moved everything out of your house. If that other house falls through, now you\u2019re in a situation where you need to start over, and you have a house that\u2019s not showing as well as it was when you first put it on the market because now you have little dents in your carpet from where your sofa was and the faded areas on the walls where the bed frames were.\u201d<\/p>\n In theory, you want to accept an offer with few contingencies \u2014 the fewer contingencies, the more likely the deal is to close. But the reality is, the market will largely dictate your ability to avoid contingent offers or not, not to mention influence the probability that a contingent offer will succeed or fall through.<\/p>\n In a buyer\u2019s market<\/a>, the inventory of homes is high compared to the number of buyers. With fewer buyers offering on homes, you\u2019re more likely to deal with contingencies to secure a sale. Donnelly explains that in slow markets, even offers with home sale contingencies are desirable:<\/p>\n \u201cI remember feeling that way about two years ago when we weren\u2019t selling much and hit a low for three or four months. During that time, not knowing what the future brings, it\u2019s like, hey, a buyer’s a buyer, and maybe it’s going to take you a little bit longer to close this sale, but it may be something you want to look into.\u201d<\/p>\n In a hot seller\u2019s market<\/a> where the buyer pool greatly exceeds the inventory of homes for sale, buyers may cut contingencies out of their offer to compete for the limited housing options. As a seller, you\u2019re also more likely to receive multiple offers, allowing you to pass up those with risky contingencies.<\/p>\n On the other hand, when your home sparks a bidding war<\/a>, effectively driving up the price of your home higher than market value, you need to watch out for buyers\u2019 appraisal contingencies. If the home appraises for less than the winning buyer\u2019s offer<\/a>, you may need to adjust the deal accordingly.<\/p>\n When the economy dips, contingent offers are more likely to fall through. Buyers who unexpectedly lose income may fail to qualify for a loan, walking away from the deal via financing contingency. Likewise, buyers with home sale contingencies may lose their buyer from the same cause, or themselves may decide against moving until the economy improves.<\/p>\n Donnelly confirms that more contingent offers fell through in her market than usual in the past few months due to pandemic related job losses<\/a>:<\/p>\n \u201cThere was a really nice young couple who I had been showing houses to for a while. We found the perfect home, we wrote the offer, and I mean honestly, it was literally the next day that they closed their business \u2014 she owns a gym. So they canceled their offer on an $800,000 home.\u201d<\/p>\n Donnelly\u2019s client was one of nearly 11,700 transactions that fell out of escrow<\/a> in March 2020 in neighboring Los Angeles, Orange, Riverside, and San Bernardino counties.<\/p>\n While the market\u2019s movements are out of your hands, you hold power to avoid contingencies or at least to negotiate them in your favor.<\/p>\n The best way to avoid contingencies? Sell your home to a cash buyer<\/a>. Cash buyers have the funds to pay for your home today, guaranteeing a shorter, more straightforward closing. HomeLight\u2019s Simple Sale<\/a> platform is the fastest way to match with a pre-approved cash buyer. Just answer a few questions about your home online, and we\u2019ll connect you to the highest bidding buyer in our network in 48 hours or less.<\/p>\n","protected":false},"excerpt":{"rendered":" In real estate, an offer typically doesn\u2019t constitute a done deal. As a seller you want to know: how often do contingent offers fall through, and what are your odds of actually closing?<\/p>\n","protected":false},"author":111,"featured_media":17521,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"cybocfi_hide_featured_image":"","footnotes":""},"categories":[322,341],"tags":[766],"class_list":["post-17512","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-logistics","category-closing","tag-what-does-contingent-mean-in-real-estate"],"acf":[],"yoast_head":"\n![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/06\/Screen-Shot-2020-06-29-at-6.07.25-PM-775x471.png\")
<\/a>The usual suspects: Contingencies to watch out for<\/h2>\n
Home sale contingency<\/h3>\n
\n
Financing contingency<\/h3>\n
\n
Inspection contingency<\/h3>\n
\n
Appraisal contingency<\/h3>\n
\n
![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/06\/how-often-do-contingent-offers-fall-through-closed-666x381.png\")
<\/a>Market conditions increase the risk of some contingencies<\/h2>\n
Buyer\u2019s market: With fewer offers, sellers agree to more contingencies<\/h3>\n
Seller\u2019s market: Expect more offers with fewer contingencies<\/h3>\n
Unsteady economy: Financing contingencies break deals due to unexpected job losses<\/h3>\n
![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/06\/how-often-do-contingent-offers-fall-through-computer-666x381.png\")
<\/a>Hedge the risk of contingencies falling through<\/h2>\n
Skip financing contingencies with a cash buyer<\/h3>\n