What Does Contingent Mean in a Real Estate Listing?

When looking for a new home, you might encounter listings marked “contingent.” This term signifies a specific stage in the home-buying process, indicating that while an offer has been accepted, the sale is not yet finalized.

Understanding Contingent Status

When a real estate listing is marked as “contingent,” it means the seller has accepted an offer from a buyer, but the sale is conditional upon certain requirements being met. These conditions, known as contingencies, are clauses written into the purchase and sale contract.

Contingencies act as safeguards for both the buyer and, less commonly, the seller, allowing them to back out of the deal without penalty if specific conditions are not satisfied. If these conditions are not met, the sale can fall through, and the property may return to the market. This status means the property is not fully off the market, as there’s still a possibility the initial agreement might not proceed.

Common Real Estate Contingencies

Real estate transactions frequently include several types of contingencies, each designed to protect the buyer or seller under specific circumstances. These clauses must be fulfilled within a specified timeframe for the contract to become legally binding.

An inspection contingency allows the buyer to conduct a professional home inspection within a set period, often 7 to 10 days. If the inspection reveals significant issues, the buyer can request repairs, negotiate a price reduction, or withdraw from the contract and typically receive their earnest money deposit back.

The appraisal contingency protects the buyer if the property’s appraised value is less than the agreed-upon purchase price. Lenders will not loan more than the appraised value, so if the appraisal comes in low, this contingency allows the buyer to renegotiate the price with the seller, pay the difference in cash, or cancel the contract without losing their earnest money.

A financing or loan contingency permits the buyer to withdraw from the contract if they cannot secure the necessary mortgage financing within a specified period, typically 30 to 60 days. This protects the buyer from being obligated to purchase a home they cannot afford due to a denied loan application or unfavorable loan terms. If financing falls through within this timeframe, the buyer can usually exit the deal without penalty and retain their earnest money.

A sale of current home contingency means the buyer’s purchase of the new property is dependent on the successful sale of their existing home. This is common for buyers who need the proceeds from their current home to finance the new purchase and wish to avoid carrying two mortgages simultaneously. Sellers might view offers with this contingency as less attractive due to the added uncertainty and potential for delays, and some may include a “kick-out clause” allowing them to accept another offer if the buyer’s home doesn’t sell within a short period, often 48-72 hours.

What Happens During a Contingent Period

During the contingent period, both the buyer and seller work to satisfy or waive the conditions outlined in their contract. This timeframe is crucial for the buyer to perform their due diligence, which includes scheduling inspections, obtaining an appraisal, and securing financing. The length of these periods can vary, but inspections often occur within 7 to 17 days, while financing and appraisal contingencies might extend to 21 to 60 days.

If a contingency is not met, the buyer has the option to request an extension, renegotiate terms, or terminate the contract. If the buyer terminates the contract within the stipulated contingency period due to an unfulfilled condition, they generally receive their earnest money deposit back. Conversely, if the buyer fails to meet a deadline or waives a contingency and then backs out, they risk forfeiting their deposit.

Sellers may continue to show the property and accept “backup offers” even while a home is contingent. A backup offer becomes relevant if the primary contingent offer falls through, allowing the seller to proceed with another buyer without having to relist the property. This provides a safety net for the seller, particularly if the initial contingent offer has conditions that are less certain to be met.

Distinguishing Contingent from Other Listing Statuses

Understanding the differences between “contingent” and other real estate listing statuses is important for prospective buyers. Each status indicates a different stage in the sales process and has implications for whether a property is still truly available.

An active listing means the property is currently available for sale and has not yet received an accepted offer. This is the initial stage where buyers can freely make offers.

A pending status indicates that an offer has been accepted, and all contingencies have been met or waived. At this stage, the transaction is moving closer to closing, and the property is usually no longer actively shown to other potential buyers. While not entirely impossible, it is less likely for a pending sale to fall through compared to a contingent one.

The sold/closed status signifies that the transaction is complete, and ownership of the property has officially transferred from the seller to the buyer. This is the final stage of the real estate process.

The term “under contract” is sometimes used broadly and can refer to either a contingent or pending status, as it simply means a buyer and seller have signed a purchase agreement. However, “contingent” and “pending” provide more specific details about the stage of the sale and whether conditions still need to be satisfied.