“I Know What You Meant” Department:
Contingent Offer Confusion
Residential real estate is full of confusing, non-intuitive (if not counter-intuitive) terms.
Like, the Realtor that the industry calls “the Selling agent,” once a deal closes, actually represents the Buyer (the agent representing the Seller is known as “the listing agent”). See, “Quick! Who Does the Selling Agent Represent?”
Or, the showy “Sold!” rider on top of the “For Sale”sign in front of homes — at least in Minnesota — doesn’t really mean “Sold,” it means “Pending” (once the home is really sold . . . the “For Sale” sign is removed).
But, no type of deal, at least in my experience, is more fraught with confusing terms than so-called Contingent Sales. See, “Daisy Chains, Dominoes & Contingent Offers.”
Define, “Contingency”
For starters, almost every deal is subject to contingencies: for the Buyer’s inspection, for the Buyer’s financing (and crucially, the home appraising), etc.
But, for reasons of custom if not habit, only home sales that are contractually tied to the sale of the Buyer’s current home are known as “Contingent sales.”
While Sellers especially often misunderstand how such deals work, their gist is, the Buyer and Seller agree that the Buyer has a specified period — usually 60-90 days — to find a Buyer for their home, referred to as “the backup house.” During that time, the Seller may continue to show the home to other Buyers, and indeed, can even call (get rid of) the Contingency by giving the Buyer sufficient notice.
In the meantime, the existence of multiple, linked deals gives rise to some confusing communications.
Like the voicemail I received the other day on one of my listings (I’m representing the Seller) telling me that “the Buyer’s Buyer’s lender** had finished underwriting their loan.”
And yes, that’s good news. 🙂
**I’m not sure this is any clearer: “the Backup home Buyer’s mortgage lender.”
