How Long Can a Home Be Contingent For?
Understand the duration of a home's contingent status in real estate transactions. Learn how these critical timelines are set and managed.
When a home is listed as “contingent,” an offer has been accepted, but the transaction is not yet finalized. This status indicates the sale depends on specific conditions being met within a defined timeframe. These conditions, known as contingencies, are outlined in the purchase agreement and protect either the buyer or the seller.
Common Contingency Types
Common contingencies are included in real estate contracts to safeguard both parties. An inspection contingency grants the buyer a period to conduct professional inspections. This allows the buyer to identify significant issues with the home’s structure or systems. If problems are discovered, this contingency provides options to renegotiate terms, request repairs, or withdraw from the contract without penalty.
A financing or mortgage contingency makes the sale dependent on the buyer securing loan approval. This protects the buyer from purchasing a home they cannot afford. If the buyer cannot obtain financing within the specified period, this contingency allows them to cancel the deal, often with their earnest money deposit returned.
An appraisal contingency ensures the property’s appraised value meets or exceeds the purchase price. Lenders require an appraisal to confirm value before approving a mortgage, as they typically will not loan more than the appraised amount. If the appraisal is lower than the sale price, the buyer can renegotiate or withdraw. A home sale contingency protects a buyer who needs to sell their current property to finance a new purchase. This allows the buyer time to sell their existing home, preventing two mortgages.
Setting Contingency Timelines
Contingency durations are negotiated between the buyer and seller and stated in the purchase agreement. Timelines vary based on market conditions, property type, and local real estate practices. A buyer might propose shorter periods in a competitive market to make their offer more appealing.
Inspection contingencies typically range from 7 to 10 days, allowing time for the report. Financing contingencies commonly span 30 to 60 days for loan approval. Appraisal contingencies are often tied to financing, as appraisal is a step in securing a mortgage. Home sale contingencies can vary, sometimes extending for weeks or months to market and close another property.
If delays occur, both parties can agree to extend a contingency deadline. This involves a written addendum to the original contract, signed by both the buyer and seller. However, an extension to the closing date does not automatically extend contingency dates; each must be addressed specifically.
Managing the Contingency Period
During the contingency period, actions are taken to satisfy or waive the conditions. For an inspection contingency, the buyer arranges for a professional home inspector. Based on the report, the buyer may request repairs, a credit at closing, or terminate the agreement if issues are substantial.
Under a financing contingency, the buyer works with their lender to finalize mortgage approval. This involves submitting documents, underwriting, and ensuring loan terms align with the contract. If the buyer secures the loan, they provide a mortgage commitment letter to the seller. For an appraisal contingency, the lender orders an appraisal to determine market value. If the appraisal is low, the buyer and seller may negotiate a price reduction, or the buyer may need to bring additional funds to closing.
Once conditions are met, or the buyer proceeds, the contingency is formally removed or waived. This involves the buyer signing a contingency removal document. If a buyer fails to remove a contingency by its deadline, the seller may issue a “Notice to Buyer to Perform,” which can lead to contract cancellation if the buyer does not act. With a home sale contingency, sellers sometimes include a “kick-out clause,” allowing them to market the property and accept backup offers. If a stronger offer emerges, the original buyer is usually given a short timeframe, such as 24 to 72 hours, to either remove their home sale contingency and proceed or allow the seller to accept the new offer.