Increased Contingency Offers a Sign of Shifting Market

The real estate market in Atlanta has started to shift toward a more neutral market.  Buyers are starting to get the upper hand and are beginning to us contingencies clauses in their offers to better protect themselves in a home purchase. In Atlanta I started seeing them in June and that trend continues to grow.

What is a contingency clause?  In a contract, a buyer may say this offer is conditioned on certain, specific things happening before they are obligated to finalize and purchase a home.  They have traditionally included

  1. That the buyers existing home be sold before they are obligated to buy the home they are writing a purchase offer on to buy.
  2. That the home they are buying appraises for at least the purchase price.
  3. That the home they want to buy passes an inspection by a qualified home inspector – or the seller has to make repairs.

During the hottest days of Atlanta’s seller’s market, we saw these contingent property offers disappearAny buyer including one of these contingencies was usually passed over for a “Better”, “Cleaner” offer that did not have contingencies.

This could happen because corporate investors would buy the existing home from the person wanting to trade up or purchase a new home.  These cash offers had 7- 14 day closing windows and they were “all cash”  It was a handy option for home buyers.  They were known in the trade as “buy-before-you-sell” companies.  But there is no free lunch and these corporate investors were not offering full-price cash offers for buyers’ homes.

I am seeing a shift in the market where the contingent property offer has come back with the other contingencies like the appraisal and inspection contingencies. Atlanta was a red hot real estate market last spring.  It is now a “warm” real estate market and sales are still happening.  But sellers need to shift their mindset to understand this shifting real estate market