How Often Do Contingent Offers Fall Through?

Understanding Contingent Offers 

In real estate transactions, a contingent offer means that certain conditions must be satisfied before the sale contract is finalized and the seller receives their funds. Both the buyer and seller can include contingency clauses for home sales. 

When the home is in contingent status, the original buyer has a claim on the home, preventing the seller from moving forward with other buyers. 

However, it’s possible to include a kick-out clause, which allows the seller to continue seeking a new buyer during this time. 

The contingency period gives parties a safety net so they can perform their due diligence. The buyer has time to receive mortgage approval and assess the property’s condition, and the seller can put the home back on the market if the buyer cannot secure financing or decides to back out of the deal. 

How Often Do Contingent Offers Fall Through?

In 2022, the National Association of Realtors estimated that approximately 7% of contingent offers fall through. 

This means that only some contingencies fall through. Still, your experience may vary depending on the home’s condition, the current market conditions, and the buyers you’re soliciting. 

While there are many factors that influence whether a deal will fall through, the most common reasons the buyer or seller may back out include the following.

The Top Concern: Failed Financing Contingency

Many buyers use mortgage financing to buy a home, making the mortgage contingency one of the most common contingencies in the industry. It is also one of the most common reasons that a deal will fail. This contingency allows the buyer to back out if they don’t get loan approval.

In most of these cases, the buyer was prequalified, but when they get to the approval process, the mortgage company decides not to approve a loan.

The Impact of Failed Inspection Contingencies

The home inspection contingency means that approval of the purchase depends on the home being in good shape. 

While many sellers will provide an existing home inspection to demonstrate the home’s safety, the buyer may decide to get a new inspection in case the existing property inspection is out of date. 

If issues arise, the buyer may reconsider the home sale, or they may ask the seller to make repairs. As these can cost a significant amount of money, the seller may refuse, and the buyer can then activate the contingency clause to back out of the sale.

Appraisal Contingencies and Market Value Discrepancies

An appraisal contingency means that the buyer or their lender can back out of the sale if the asking price does not match the property’s appraised value. 

An appraisal contingency offer may be more common in a buyer’s market when the buyer can make greater demands on the seller, or if current home values have changed significantly in recent years.

Title Contingency: Ensuring Clear Ownership

Title issues can be a significant headache for the buyer and seller, terminating a new purchase right away. The buyer does not want to run into legal issues down the road if someone else stakes a claim on the property. 

This home sale contingency is not an issue for most sellers, but it can become a problem if the home has been in the family for a long time, was purchased for cash, or there were probate issues in the past.

Home Sale Contingency: Waiting for the Buyer’s House to Sell

Also known as a refusal contingency or right of first refusal, this contingent offer depends on the buyer selling their current home before they purchase the property. 

Because refusal contingencies depend on how much effort buyers are putting into selling their own home and the current market is a seller’s market, these contingencies can lead to significant delays.

Risks of Accepting Contingent Offers

Because contingent offers often fail, sellers must weigh the potential expenses, delays, and complications before deciding whether to accept a contingency clause. 

Strategies to Mitigate the Risks of Contingent Offers

To prevent risks with a contingent offer, sellers should communicate clearly about their expectations for the sale, including specific timelines for the contingent offer. They can also demand higher earnest money deposits and accept backup offers, giving them options if the buyer backs out.

Can a Seller Back Out of a Contingent Offer?

Yes, it’s possible for a seller to back out, but they may lose money and run into legal trouble. As such, a seller contemplating a contingent offer should speak to a realtor or attorney to ensure they won’t have any problems if they do so. 

What Happens When a Contingent Offer Falls Through?

When contingent offers fall through, the current homeowner may have to relist the property or accept a lower offer from a different buyer.

If the buyer doesn’t go through with the sale, they may lose their deposit, which can cost them thousands of dollars. 

Alternatives to Contingent Offers

If the seller is concerned about contingency offers falling through, they can demand a non-contingent offer, where the buyer is obligated to buy the house no matter what.

Another option is to work with cash buyers, who do not use contingencies. As cash buyers don’t require financing and don’t appraise a home before purchase, they can complete the sale much faster than residential buyers using financing. They also buy homes in any condition, making the sale more secure.

How A-List Properties Helps Texas Homeowners Sell Without Contingencies?

We offer a reliable and efficient alternative to the typical Texas home sales process. As we don’t use contingencies or mortgage financing, you can sell your home to us with far less risk than working with a residential buyer. There are no closing costs, hidden fees, or lengthy appraisal processes. We provide cash at closing and can generally complete the entire transaction within days or weeks, not months. 

Considering Selling to a Cash Buyer

There are a few circumstances when selling to a cash buyer will be more practical than selling on the open market. If your home is not in great shape or has issues that may trigger the inspection contingency, you may find offers falling through, costing you time and money. Cash buyers accept homes in any condition, including those with significant issues like water damage or foundation cracks.

Cash buyers also complete sales much faster than is possible with residential sales. This can be a crucial consideration for those who need to sell a home quickly, such as if they are facing foreclosure or need to move across the country right away. If you’d like to get a free, no-obligation quote on your home, reach out to A-List Properties! We provide fair offers, excellent customer service, and an easy sales process. Call or text us at (972) 526-7042, or use our online contact form, to get your free offer.