What does contingent mean on a home for sale?
Decipher "contingent" on a home listing. Understand what this real estate status means for accepted offers, conditional sales, and the path to closing.
A home listed as “contingent” indicates a seller has accepted an offer, but the sale’s finalization depends on specific conditions being met. These conditions, known as contingencies, are outlined in the purchase agreement and must be satisfied before closing. This status signifies a deal is in place, but it is not yet complete and could fall through if the agreed-upon conditions are not fulfilled.
Understanding Contingent Status
When a home’s listing status is “contingent,” the property is under contract, but the sale’s progression is conditional. This differs from an “active” listing, where the home is still fully available for offers, and a “pending” status, which indicates all contingencies have been met or waived, and the sale is moving closer to finalization. A contingent status means an offer has been accepted, but the deal’s viability hinges on certain requirements being satisfied.
Contingencies mean the sale may not close, and the home could return to the market. For example, if a buyer cannot secure financing or a home inspection reveals significant issues, the contract might be terminated. This conditional agreement protects both parties, ensuring prerequisites are met before ownership transfer.
Key Contingency Types
Common contingencies protect buyers and sellers in a real estate transaction. These clauses allow parties to withdraw from the contract without penalty if specific conditions are not met.
A financing contingency means the sale depends on the buyer securing a mortgage loan. This clause allows the buyer to terminate the contract and receive their earnest money deposit back if they cannot obtain financing within a specified timeframe. Lenders typically require an appraisal to determine the home’s value before approving a loan.
The inspection contingency allows the buyer to conduct a professional home inspection within a set period. If the inspection reveals significant issues, the buyer can negotiate with the seller for repairs, a price reduction, or withdraw from the contract. This protects the buyer from purchasing a home with undisclosed problems.
An appraisal contingency protects the buyer if the home’s appraised value is less than the agreed-upon purchase price. Lenders generally only loan up to the appraised value, so if the appraisal comes in low, this contingency allows the buyer to renegotiate the price or back out of the deal without losing their earnest money.
The sale of buyer’s home contingency means the buyer’s purchase of the new home is contingent upon the successful sale of their current property by a specified date. This protects the buyer from owning two homes simultaneously if their existing property does not sell. Other contingencies can include those related to title searches or the review of homeowners association documents.
The Contingent Period Process
Once an offer with contingencies is accepted, a specific period begins for both buyer and seller to satisfy these conditions. This “contingency period” is a defined timeframe, typically ranging from a few days to several weeks, depending on the type of contingency and negotiation. During this phase, the buyer fulfills their contractual obligations.
For a financing contingency, the buyer must apply for a mortgage, provide financial documentation, and work with the lender to secure loan approval. This process usually includes the lender ordering an appraisal to confirm the property’s value. The typical timeframe for a mortgage contingency can be 30 to 60 days.
For an inspection contingency, the buyer schedules a professional home inspection, usually within 7 to 10 days of offer acceptance. The inspector provides a detailed report outlining any issues. Based on these findings, the buyer may submit a request for repairs or a price adjustment to the seller. Sellers then have a period, often 3 to 10 days, to respond to these requests, which can involve agreeing to repairs, offering credits, or declining the requests, potentially leading to renegotiation or contract termination.
The appraisal contingency involves the lender arranging for an independent appraiser to assess the home’s market value. This usually occurs within 10 to 20 days. If the appraisal comes in below the agreed-upon sales price, the buyer and seller must negotiate, which might involve the seller lowering the price, the buyer covering the difference, or contract termination. Once all conditions are met, the buyer provides written notice to remove the contingencies, moving the sale closer to closing.
Implications for Other Interested Parties
The “contingent” status carries implications for other potential buyers and the seller’s marketing strategy. Even with an accepted offer, a contingent listing is often considered an active listing. Sellers may continue to market the home and accept backup offers.
A backup offer is a secondary, legally binding contract that becomes active if the primary contingent offer falls through. Sellers accept backup offers as a safety net, recognizing that contingent deals can fail. This provides an opportunity to acquire the property if the initial transaction does not proceed to closing.
While a contingent status means the home is not yet definitively sold, the likelihood of a deal falling through varies. The possibility always exists, making backup offers a valuable strategy for both buyers and sellers. If a primary deal collapses, the seller avoids re-listing the property, and the backup buyer can proceed without further competition.