How Often Do Contingent Offers Fall Through?

•  
• April 25, 2022
• 0 comments

The process of home buying is not as easy as simply making an offer on a home and then walking away with the keys. There are more processes involved, and it can get complicated at times. For example, there are certain conditions surrounding the purchase of a home that might cause the sale to fall through. 

This is why having a set of contingencies is important to protect the buyer under these circumstances. How often do contingent offers fall through? In this guide, you will find out everything you need to know about making a contingent offer and how to buy a home successfully. 

What is a Contingent Offer?

Contingencies serve as a safety measure for both the buyer and seller when they enter into a real estate transaction. A contingent offer is an initial offer that is made by the buyer that indicates their willingness to buy a home for an agreed amount as long as the specified conditions are met. These contingencies often involve the condition of the house and the availability of financing. 

The length of these contingent offers varies on a case-to-case basis. It will typically be based on the type of contingencies that you have stipulated as part of the contract offer. On average, a contingent offer lasts between 30 and 60 days. In most cases though, the contingent offer stays active until the conditions that were agreed to are met. 

Here are some examples of a contingent offer:

• Home Sale – If you need to sell your old home in order to pay for the new home purchase. 
• Appraisal – If you need to get a professional appraisal to assess the value of the home in order to prevent the buyer from overpaying. 
• Title – If there are issues with the home’s title and you want it to be sorted out before proceeding with the purchase. 
• Inspection – If you want to complete a home inspection to ensure there are no major issues with the home upon purchase (or to get it fixed prior to closing the deal).
• Financing – If you fail to secure a loan to finance the purchase of the home. 

How Often Do Contingent Offers Fall Through?

Even though the rate of homeownership has gone up over the past few decades, the process of home buying has become more complicated. This is why a lot of buyers request contingencies as part of their home purchase to safeguard against financial loss during the home buying process.

Fortunately, there are not a lot of contingent offers that fall through. The majority of the offers reach a closing deal. As many as 96% of the contingent offers are fulfilled by the time of closing the sale. This means that 4% of the contingent offers fall through. 

However, the actual rate of the contingency offers that fall through can vary significantly based on a number of factors. In general, the condition of the home can play a huge factor in this deal. Homes that are in good condition are closed even with contingencies in place and those in poor condition are the ones negatively affected by these contingencies. 

What Causes Contingent Offers to Fall Through?

There are a number of reasons that cause a contingent offer to fall through. This could be any of the following:

• When a home is overvalued, a buyer typically backs out of the offer. This is why a professional appraisal is required for buyers that finance the purchase through a loan. It enables the lender to get a more accurate assessment of the home’s market value and to avoid the buyer from overpaying for the house. 
• When a buyer fails to secure financing, it can cause the buyer to back out of the deal because they are unable to pay for the home purchase (if cash is not an option). For buyers, it is important to take good care of finances when planning to take out a home loan to increase the chances of getting approved for the loan. 
• When the house has no clear title, the buyer could back out of the contingent offer. It is important for buyers to check the title prior to making an offer on a home or for the seller to fix any issues with the title prior to putting the home up for sale. 
• When there are issues during a home inspection, most buyers either request the seller to fix those issues or they back out of the deal altogether. The latter scenario usually happens when the seller is unable to address the issues found during a home inspection within the agreed period of time, or the repairs are too costly for both parties to cover. No one wants to buy a home that is in poor condition, which is why buyers back out of the deal. 
• When the buyer is unable to sell their current home to pay for the purchase, most would back out of the deal as a result. In some cases though, buyers simply hold out on the offer for longer until they can sell their current home. It is the seller’s prerogative to hold the offer a little longer or find a new buyer. 

How to Prevent Contingent Offers Falling Through

There are ways to get around these issues with contingent offers. 

From the buyer’s perspective, it is important to check if the home has been professionally appraised and to get a home inspection certificate. With these in place, you can guarantee that the home is in good condition and that it is priced fairly. 

From the seller’s perspective, you always have the option to receive an offer without contingencies. But if you believe that having these contingencies in place is what is going to help sell your property, you can fix any issues in your home to keep it in good condition and to sort out any issues with the title. If you can find someone who can make a direct cash offer, that’s even better because it means you won’t run into any financing trouble on the buyer’s end.