What Does a House for Sale Contingent Mean?

A “contingent” status on a house for sale indicates that an offer has been accepted by the seller, but the sale is not yet final. The transaction is conditional upon specific events or criteria being met within a defined timeframe. This status provides a framework for the sale to move forward while protecting both parties.

Understanding Contingent Status

A contingent status means a legally binding contract has been signed between a buyer and seller, but the completion of the sale hinges on the fulfillment of particular conditions. These conditions, known as contingencies, are outlined in the purchase agreement. Contingencies safeguard the interests of both the buyer and the seller, allowing either party to withdraw from the contract without penalty if the specified terms are not met.

This status differs from an “active” listing, where a property is still fully available for offers and no agreement has been reached. It also contrasts with a “pending” status, which indicates that all contingencies have been satisfied or waived, and the sale is progressing toward its final closing. While a contingent listing means an offer is accepted, the property may still be shown to other potential buyers, and backup offers might be considered.

Common Types of Contingencies

Numerous types of contingency clauses can be incorporated into a real estate contract, each serving to protect a party involved in the transaction. These clauses define the circumstances under which a buyer can withdraw from a purchase without financial repercussions, such as losing their earnest money deposit.

A financing contingency, also known as a mortgage contingency, protects the buyer by making the sale dependent on their ability to secure a mortgage loan. This clause grants the buyer a specified period, often between 30 and 60 days, to obtain loan approval. If the buyer is unable to secure the necessary financing within this timeframe, they can withdraw from the contract and receive their earnest money deposit back.

An inspection contingency allows the buyer to have the home professionally inspected for any defects or issues. Buyers have a window of 7 to 10 days to conduct inspections, review reports, and communicate any objections to the seller. If significant problems are discovered, this contingency provides the buyer with options, including requesting repairs, negotiating a price adjustment, or cancelling the contract and retaining their earnest money.

An appraisal contingency ensures that the home’s appraised value meets or exceeds the agreed-upon purchase price. Lenders require an appraisal to confirm the property’s value before approving a loan, as they will not lend more than the home is worth. If the appraisal comes in lower than the sale price, the buyer can renegotiate the price with the seller, pay the difference in cash, or withdraw from the deal without losing their earnest money.

A sale of buyer’s home contingency makes the purchase of the new property dependent on the successful sale of the buyer’s current residence. This contingency is useful for buyers who need the proceeds from their existing home to finance the new purchase. Sellers may view offers with this contingency as less appealing due to the added uncertainty and potential for delays.

The Contingency Period Process

The period during which a house is under contingent status involves actions and communications between the buyer, seller, and their agents to satisfy the agreed-upon conditions. Each contingency has a specified deadline within the purchase agreement, ranging from a few days to several weeks. Adhering to these timelines ensures the transaction progresses smoothly.

The buyer plays a proactive role during this period, initiating steps to fulfill the contingencies. For a financing contingency, this involves submitting a formal mortgage application and working with the lender to secure loan approval. For an inspection contingency, the buyer arranges for professional home inspections and other specialized assessments within the designated timeframe. The buyer is responsible for the costs associated with these inspections and appraisals.

The seller’s role involves cooperating with the buyer’s efforts to satisfy contingencies. This includes granting access to the property for inspections and appraisals. If an inspection reveals issues, the seller may need to review repair requests from the buyer and engage in negotiations regarding potential fixes, credits, or price adjustments. The seller then awaits confirmation that the buyer’s financing is secured and that all other conditions are being met.

Communication and negotiation are ongoing throughout the contingency period. Findings from inspections or appraisals are shared, and any discrepancies or issues are discussed between the parties. Buyers and sellers negotiate resolutions to address concerns, aiming to reach a mutual agreement that allows the sale to proceed.

Once a contingency’s conditions are met or a mutually agreeable resolution is reached, the buyer formally removes or waives that contingency. This is done in writing. The removal of contingencies signifies the buyer’s commitment to the purchase, moving the transaction closer to its final stages.

Outcomes of a Contingent Sale

As the contingency period concludes, there are two outcomes for a contingent sale: successful fulfillment or contingency failure. The path of the transaction depends on whether the conditions outlined in the purchase agreement are met.

When all contingencies are successfully met or formally waived by the buyer, the contract becomes firm and binding. This means conditions protecting the buyer have been satisfied, and the sale can proceed towards closing. At this point, the property status transitions from “contingent” to “pending,” signifying that the sale is moving forward with a high likelihood of completion. The earnest money deposit, held in an escrow account, is then applied towards the buyer’s down payment or closing costs.

Conversely, if a contingency is not met within the agreed-upon timeframe, the contract may be terminated. For example, if a buyer’s loan application is denied, an appraisal comes in significantly low with no renegotiation, or an inspection issue cannot be resolved, the buyer can walk away from the deal. In such cases, the contract stipulates that the buyer’s earnest money deposit is returned to them, provided the termination occurs within the terms of the contingency.