What Does Contingent Mean When Buying a House?

When buying a house, “contingent” means a seller has accepted an offer, but the sale is not yet final. The transaction is conditional upon specific criteria being met by either the buyer or the seller. These conditions protect both parties, allowing them to withdraw from the contract without penalty if requirements are not satisfied. Contingencies ensure steps like securing financing or inspecting the property are completed before closing.

Defining Contingent Status

A contingent status indicates a home sale is under contract, but its finalization depends on specific conditions. These conditions, known as contingencies, are clauses written into the purchase agreement. If these conditions are not met within an agreed timeframe, the buyer can withdraw from the contract, often recovering any earnest money deposit.

This differs from an “active” listing, where no offer has been accepted. A “pending” status usually means all contingencies are satisfied or waived, and the transaction is nearing closing. While both contingent and pending indicate an accepted offer, a contingent listing has a higher possibility of falling through.

Common Contingency Types

Real estate transactions frequently include several standard contingencies to safeguard the interests of both buyers and sellers.
An inspection contingency allows the buyer to hire a professional to thoroughly examine the property for defects or issues. If significant problems are discovered, such as structural damage or major system failures, the buyer can negotiate for repairs, request a price reduction, or choose to withdraw from the purchase, typically with a refund of their earnest money deposit. This protection prevents buyers from acquiring a property with unforeseen, costly repairs.

An appraisal contingency protects the buyer if the home’s appraised value comes in lower than the agreed-upon purchase price. Lenders generally will not finance a loan for more than a home’s appraised value. In such a scenario, the buyer can renegotiate the price with the seller, pay the difference in cash, or terminate the contract and receive their earnest money back.

A financing, or loan, contingency protects the buyer if they are unable to secure the necessary mortgage financing for the purchase. This contingency specifies a deadline by which the buyer must obtain loan approval. If the buyer’s financing falls through, this allows them to cancel the contract without penalty and retain their earnest money deposit.

Another type is the sale of current home contingency, which makes the purchase of the new property conditional on the buyer successfully selling their existing home. Sellers may include a “kick-out clause” in such agreements, which allows them to continue marketing the property. If the seller receives another offer, the initial buyer is given a short period, often 24 to 72 hours, to either remove their home sale contingency and proceed with the purchase or allow the seller to accept the new offer. Other less common contingencies might include those for title review or homeowners association (HOA) document review.

The Contingency Period

Once a purchase offer with contingencies is accepted, a defined contingency period begins, during which all specified conditions must be fulfilled. Each contingency typically has its own timeframe, often ranging from 7 to 60 days, depending on the nature of the condition and local market practices.

During this phase, the buyer undertakes several important actions to satisfy their contractual obligations. This includes scheduling and conducting a professional home inspection to identify any property defects. Simultaneously, the buyer coordinates with their lender, who initiates the appraisal of the property and proceeds with loan underwriting to finalize financing approval. The seller’s role during this time primarily involves providing access to the property for inspections and appraisals. If issues arise, both parties typically engage in negotiations to resolve these matters, which might involve agreeing on repairs, credits, or a price adjustment.

Navigating Contingent Offers

Contingencies are formally satisfied or removed, typically through written agreement by both parties or by allowing a specified deadline to pass. Once a contingency is removed, the buyer’s earnest money deposit becomes more at risk if the buyer later withdraws from the sale without other contractual protections.

If a contingency is not met—for instance, if the home inspection reveals significant issues, the appraisal comes in low, or financing falls through—the buyer has options. They can renegotiate the terms of the contract, such as requesting repairs or a price reduction, or they can terminate the agreement without penalty. For buyers, it is important to conduct thorough inspections and understand all financing terms before waiving contingencies, as doing so removes their safety net. Waiving contingencies can make an offer more attractive to a seller in a competitive market but increases financial risks for the buyer.

From a seller’s perspective, accepting a contingent offer requires careful consideration of the strength of the buyer’s contingencies and the proposed timeframes. Sellers may evaluate the likelihood of the buyer fulfilling their conditions, and some may opt to continue showing the home and accepting backup offers. Once all contingencies are successfully removed or satisfied, the property status typically transitions from “contingent” to “pending,” signaling the sale is moving toward closing.