In real estate, a contingency is a condition that must be met before a sale can go through. Contingencies provide a way for the buyer or seller to back out of the sale or to renegotiate terms. The most common contingencies include financing, appraisal, inspection, and title contingencies. Let’s look at these in more detail.
- Financing contingency: This means that the sale is contingent on the buyer obtaining a loan. If the buyer is unable to obtain a loan, they have the option to back out without penalty.
- Appraisal contingency: This contingency helps to protect the buyer in case the property appraises for less than the purchase price. In such a case, the buyer has the option to renegotiate the price or back out of the sale.
- Inspection contingency: This contingency allows the buyer to inspect the property and gives them the option to back out or renegotiate if significant issues are found during the inspection.
- Title contingency: This contingency ensures that the seller has clear title to the property, and as above, gives the buyer the option to back out or renegotiate in case of title issues.
All of these contingencies will usually be present in an on-market transaction. In an off-market transaction with an investor, on the other hand, things may be different. There may not be a financing contingency if the investor is using all cash, and the investor may not care about appraisal or even title contingencies (they will probably still care about the inspection contingency). Because of this, the transaction can go a lot faster.
If you are thinking about selling to an investor, feel free to contact us to see what we can do for you!