Selling a House? Why You May Not Want to Accept a Contingent Offer

Be careful what contingencies you accept when you're selling.

When you're selling your home, you may be excited to get an offer. But before you accept it, it's critical to look at what contingencies the buyer has included.

Contingencies are conditions that need to be fulfilled for the sale to go through. If they aren't fulfilled, the buyer can walk away from the transaction. They'll get their deposit back without any financial consequences.

Meanwhile, as a seller, once you accept a contingent offer, you'll have to list your home as "pending" on the MLS. This means you're unlikely to get more interest from other potential buyers and you'll miss valuable time on the market.

Some contingencies are normal. But before you accept an offer with a lot of contingencies, think about the big risk involved.

How a contingent offer could make selling your home a challenge

Offers often include a number of common contingencies. These include inspection, financing, and appraisal contingencies.

• Inspection contingency. A satisfactory home inspection will be required for the sale to go through. If problems turn up, the buyer might try to get you to agree to make repairs or to take money off the purchase price.
• Financing contingency. In this case, the sale can only move forward if the buyer gets approved for a home loan. It could be an issue if their credit or income are shaky.
• Appraisal contingency. The home will need to appraise for at least as much as the buyer is paying. If it doesn't, the buyer might ask you to take money off. They may have to back out because they have trouble getting approved for a mortgage.

If you get an offer without these contingencies, consider yourself lucky. Each one increases the chances a sale will fall through. However, buyers do need to protect themselves. It's unlikely an offer won't include at least a couple of these conditions.

Be wary of additional contingencies

Some offers include additional contingencies -- and these can pose a bigger problem. For example, if a buyer owns an existing home, they may make the purchase contingent on their ability to sell their house.

If you accept an offer with this type of contingency, you're asking for trouble. You'll have to essentially pull your house off the market (by listing it as pending) and hope the buyer's home sells. There's no guarantee as to when or if that will happen. And you don't have control over how much they list their home for or whether they're actively doing all they can to find a buyer.

If you spot an offer that's contingent upon the buyer selling their property, you should seriously consider passing it up. If you're reliant on two buyers getting financing and getting to closing, the chances are just too high your sale will be derailed.

Learn more: Pending vs. contingent home sales: What's the difference?