Arizona home buyers are understandably cautious when make a Contingent offer to purchase a new house. Why? All you have to do is take a look at the first decade of the new Century in Arizona Real Estate history. However, times have changed and Contingent is no long a dirty word in Arizona Real Estate.
Are Contingent Real Estate Offers Normal?
First, let’s look at why this is even a question. During the housing crisis Contingent offers were risky. Here are the main reasons. During 2005-2009:
- Many buyers relied on short sale approvals to sell their house
- Homeowners did not have any equity in their current home
- Mortgages were harder to qualify for by the day
- Lenders were increasingly scared of their own shadows and indecisive
As a result, presenting a Contingent offer to a seller became a major disadvantage for any buyer in the 2005 – 2009 time frame.
However, prior to 2005 Contingent Real Estate offers were normal. Many home-buyers had homes to sell simultaneously with their new home purchase. During this period, sellers did not fear the Contingent offer. For example, a common Real Estate cycle was as follows:
- Seller listed their home to sell
- Buyer bought that home
- Seller bought a new home
- The Real Estate world went round and round
As we know, quite a lot changed between 2005 and today. During that time span Contingent offers fell out of favor only to return as a normal transaction. While there is an inherent risk with a contingent offer, today’s Arizona Real Estate market seems to accept this once doomed type of offer.
A contingent real estate deal could fall through due to a mortgage lender issue, an inspection issue or an appraisal issue. Those risks were present then (early 2000’s) and they will forever be present. There are however ways to mitigate and minimize these risks in a contingent real estate situation.
Contingent Offers in Arizona
The best advice is for buyer’s to consider the Seller’s perspective. Seller’s want a combination of the most profitable, most efficient and most secure offer on their home. Knowing a Contingent offer is a bit of a risk in ANY market, Contingent buyers may want to consider augmenting their offer by letting the seller know you will:
- Update them when inspection is complete on Contingent home
- Communicate to seller on Contingent home’s appraisal
- Update the seller on when your buyer’s loan is approved
A Plan is Better Than No Plan
In the end, a Contingent offer is not “ideal” in the eyes of a seller. However, contingent offers with added augmentations such as transparent communication looks better than the alternative. Use these tips to help boost your contingent offer. Today’s’ market is full of people “moving up” or “downsizing” and contingent offers will become more and more commonplace.
By Jeremy House