How Often Do Contingent Offers Fall Through? What You Should Know

Ready to buy a home but worried you might be asked to pay more than what a property is worth? Maybe you need to sell your current home before you can afford a down payment on a new one. In either of these scenarios, and a few others, making a contingent offer might be the safest way to go.

But, while contingent offers provide protection to buyers, they carry some risks – especially for sellers. That’s because contingent offers, which are “contingent” on one or more circumstances coming to fruition, can fall through.

Most contingent offers ultimately do pan out, but buyers and sellers should be aware of any warning signs that a contingent offer won’t result in a completed sale.

How Many Contingent Offers Fall Through?

If you’re a seller, you might worry that accepting a contingent offer might delay or completely scuttle your home sale. But, here’s some good news: Most home sales reach closing, even with contingencies attached.

A survey from the National Association of REALTORS^® found that in early 2024 only 5% of sales contracts on homes were terminated. Only 13% of sales contracts during those months were delayed before being settled.

Buyers and sellers, then, shouldn’t assume that a contingency dooms a home sale.

Common Types Of Contingent Offers

Contingent offers are common in real estate. When a house is listed as contingent, it means a buyer put an offer in and the seller accepted it but some plans have to materialize before the sale is final.

While some contingencies are less common than others in home purchase offers, offers often include at least one contingency – known as the home inspection contingency.

Home Inspection Contingency

Many purchase offers contain a home inspection contingency stating that the sale won’t close until after the buyer orders an inspection of the property. If the inspector finds serious problems with the house, the buyer can walk away from the deal and still recover their earnest money deposit.

A professional inspector might uncover major issues with the home, including a sinking foundation, evidence of mold, or a roof that needs replacing.

A seller might be able to prevent the buyer from bowing out by fixing the problems themselves, lowering the sales price, or providing the buyer with cash to hire a contractor to repair the issues.

Home Sale Contingency

Buyers might state in their offer that they won’t be able to close on the new home until they’ve sold their current home. This is known as a home sale contingency.

Under this scenario, buyers usually have a certain number of days to sell their home before closing on a new one. If that period passes and the buyer hasn’t sold their home, the seller can entertain other offers or the buyer can move ahead with the purchase if they’re able and willing to be responsible for two monthly mortgage payments until they sell their current home.

Appraisal Contingency

Another common contingency is the appraisal contingency. After a buyer and a seller agree on an offer, the buyer’s lender will typically order an appraisal of the home to make sure that the home’s appraised value is equal to or higher than the final sales price.

If the appraisal comes in too low, the lender won’t approve a mortgage for the full sales price since lenders are only willing to provide as much money as a home is worth. An appraisal contingency says that if the home doesn’t appraise for at least its sales price, the buyer can choose not to move forward and still have their earnest money deposit refunded.

As an alternative to moving on, and if the seller is unwilling to come down on the sales price, the buyer could decide to make a larger down payment that covers the difference between the appraised value and the agreed-upon sales price. This way, they would no longer need a loan that exceeds the home’s appraised value and they would be able to get approved for the loan they do need.

Title Contingency

During a title search, a title company will look for any government bodies, companies or individuals that might have liens or ownership claims on the home that the buyers want to purchase.

Maybe the home’s seller didn’t make all their property tax payments. If so, the county government might have an ownership claim on the home. Or, maybe the seller failed to pay a contractor who then filed a lien against the property.

If a buyer has a title contingency in their purchase agreement and uncovers a lien on a property, they can abandon their purchase plans without penalty if the seller doesn’t resolve the lien before it’s time for the sale to close.

What If The Buyer’s Finances Take A Bad Turn?

Regardless of whether a home purchase offer has any contingencies attached to it, a sale can go wrong if a buyer’s finances take an unexpected turn for the worse. After the seller accepts the buyer’s offer, the buyer’s mortgage lender will start the underwriting process. This will involve a review of the buyer’s:

• Credit score
• Credit report
• Proof of income
• Debt-to-income ratio (DTI)

If a buyer’s credit score is low, their credit report is dotted with missed or late payments, or their DTI is too high, a lender might deny their request for a mortgage.

A rejection could happen even if the buyer received preapproval from a lender before they started looking at homes. Maybe the buyer lost their job or missed several credit card payments after being preapproved. Missing payments could cause their credit score to plummet, negatively impacting their final mortgage approval.

What Happens If A Contingent Offer Falls Through?

If you make an offer and the offer’s contingencies aren’t met, the sale won’t close – except in the rare instance that a buyer abandons a contingency at the last minute. For example, maybe they have a home sale contingency but find a way to stick with their purchase plans even though their current house hasn’t sold yet.

The good news is that even if a contingent offer falls through, there are other houses out there. You don’t have to give up on buying a house just because one deal didn’t make it across the finish line.

The Bottom Line

Though it doesn’t happen often, there is a risk that contingent offers will fall through. This doesn’t mean, though, that you shouldn’t include contingencies when making an offer. An example? You should always include a home inspection contingency. If you’re ready to start your own search for a home, apply for prequalification from us. Doing so will let you make the strongest possible offer.