One of the more complex parts of real estate is the contingent offer. In this post, I will explain the details of how a contingent offer works.
The first step is defining what a contingency is, as there is a difference used when speaking of the language of contingencies in a contract and a contingent offer. Contracts have various contingencies in them, like the inspection or the appraisal. A contingency is something that creates a dependency, meaning that the transaction will not be completed until the item is fulfilled. For example, once the repairs have been negotiated and agreed upon, the contingency of inspection is removed, and the process moves forward.
When we speak of a contingent offer, we are talking about the need to sell a property before another property can be purchased. If you want to make an offer on a property but you need to sell your current property first, we write up a contingent offer.
There are two parts to the contingent offer. The first is the Contingency of Sale and Close; the other is the Contingency of Close. The Contingency of Sale and Close means that your current property is either not listed yet and/or not under contract yet. It says that your property must be under contract before the Contingency of Sale can be removed. Once your house is under contract, only the second part remains, which is the Contingency of Close. This means that your property, that is now under contract, must close before you can purchase the next property. One way to look at it is that once a Contingency of Sale is removed, a Contingency of Close is like the inspection contingency; it is the last dependency needed to be removed before closing.
There are some things to note from the listing side. If an offer is accepted that has a Contingency of Sale and Close, you may still market your property as Active. That means that you can still accept another offer. The Contingency of Sale and Close has a provision in it that says the buyer has the first right of refusal to perform. To perform means to either remove the Contingency of Sale or have a financial way to buy without selling their current property. There is a time-frame that is put on the first right of refusal, which is typically 24-48 hours, depending on what was negotiated.
I imagine that some of you are wondering--how many contingent offers can be stacked on one another? The answer is they cannot be stacked. If you are the buyer and have a Contingency of Sale and Close on a property you are trying to purchase and someone makes a contingent offer on your current property that you need to sell, it will not remove the Contingency of Sale. The offer can have a Contingency of Close, but it cannot have a Contingency of Sale and Close.
If you are still reading, you can tell through this post that this is a complex process. I highly recommend calling me with questions, as each situation is different. Just as no two properties are alike, neither are offers.
Matt Gatewood
Realtor®
Keller Williams Louisville East
502-594-6582
