You're browsing homes online and you stumble across a home that's listed for sale. It looks great and you really want to see it! However, you notice that it says contingent or your agent tells you it's under contract. What does contingent mean? Here are the most common contingencies we come across in the Baltimore real estate market.
Homes inspections are the most common contingency and happen in almost every real estate transaction. Depending on how well the home inspection goes and whether or not the seller is willing to make repairs, the transaction could fall through and the house may become available again if the buyer backs out as a result of the inspection. If a home sale falls through because of a home inspection, it may be a red flag. However, maybe the buyers were just very picky and had unrealistic expectations. No matter what - you should always do a home inspection by a home inspector that you hire.
If you're using a loan on your home purchase, your lender will require an appraisal. The cost of the appraisal is a part of your lender fees and usually costs a few hundred dollars. The appraisal usually takes place after the home inspection. If the house doesn't appraise for the purchase price or higher, the buyer can renegotiate the offer price or walk away (must use financing addendum in offer).
Within the contract of sale there is a specified time for the buyer to obtain formal financing. Understand that a pre-approval by a lender is not formal financing. Once an offer gets accepted, the buyer must then make a formal application for financing within a specified set of days (usually a week or less) and obtain that financing within a specified set of days (usually 30-45 days).