What Does Contingent Mean When Buying a House?

When a house listing is marked “contingent,” a seller has accepted an offer, but the sale is not yet finalized. This status means the transaction depends on specific conditions outlined in the purchase agreement. It creates a temporary period where the property is under contract, but the deal could still be terminated if these conditions are not met.

What Contingent Means

A “contingent” status in real estate signifies that an offer has been accepted for a property, but specific conditions, known as contingencies, must be fulfilled before the sale can be completed. This means the house is under contract, but its finalization remains uncertain. Unlike an “active” listing, which is fully available, or a “pending” status, where most conditions are met, a contingent listing still has hurdles to clear.

Contingencies offer a safeguard, often for the buyer, allowing them to withdraw from the agreement without penalty if the stipulated conditions are not met. For example, if a home inspection fails significantly, the buyer can cancel the contract and reclaim their earnest money deposit. This protective aspect distinguishes a contingent status from a fully pending sale.

Key Contingency Types

Financing Contingency

A financing contingency makes the home sale dependent on the buyer securing the necessary mortgage loan. This clause protects the buyer by allowing them to cancel the contract and receive their earnest money back if they are unable to obtain financing within a specified timeframe, often 30 to 60 days. If the loan is not approved, the buyer is not penalized. Without this contingency, a buyer might be obligated to purchase the home even if they cannot obtain a loan, potentially forfeiting their earnest money deposit.

Inspection Contingency

An inspection contingency allows the buyer to have the property professionally inspected and to negotiate repairs or withdraw their offer based on the findings. Buyers typically have 7 to 10 days from offer acceptance to conduct a thorough home inspection and review the report. If the inspection reveals significant issues, the buyer can request the seller to make repairs, offer credits, or reduce the price. Alternatively, the buyer can cancel the contract without losing their earnest money. This safeguards buyers from purchasing a property with unforeseen or costly defects.

Appraisal Contingency

An appraisal contingency ensures the sale is conditional upon the property appraising for at least the agreed-upon sales price. Lenders require an appraisal to ensure the home’s value supports the loan amount, as the property serves as collateral. If the appraisal comes in lower than the purchase price, the buyer has options: negotiate with the seller to lower the price, pay the difference in cash, or withdraw from the contract without losing their earnest money deposit. This contingency is important when using a mortgage, as lenders will not finance more than the appraised value.

Home Sale Contingency

A home sale contingency means the buyer’s purchase of the new property depends on the successful sale of their current home by a specific date. This protects the buyer from the financial burden of owning two homes simultaneously. Sellers might include a “kick-out clause,” allowing them to continue marketing the property. If the seller receives another offer without a home sale contingency, the original buyer has a short timeframe, typically 24 to 72 hours, to either remove their home sale contingency and proceed or allow the seller to accept the new offer.

The Contingent Period

Once an offer becomes contingent, a specific timeline for fulfilling the conditions begins, typically ranging from a few days to several weeks, as outlined in the purchase agreement. For the buyer, this period involves actively working to satisfy each contingency. If a financing contingency is in place, the buyer submits a formal mortgage loan application and provides necessary financial documentation to their chosen lender.

During this time, the buyer also arranges for the home inspection, usually within 5 to 10 days of going under contract. After the inspection, the buyer reviews the detailed report, identifying any issues with the property’s structure, systems, or components. Based on these findings, the buyer might negotiate with the seller to address repairs or adjust the purchase price. The appraisal is typically scheduled 1-2 weeks after the inspection, with the report often completed within 2-10 days of the appraiser’s visit.

For the seller, the contingent period involves cooperating with the buyer’s requests, such as allowing access for inspections and appraisals. They may need to consider and negotiate any repair requests or price adjustments that arise from the reports. The seller waits for the buyer to fulfill or waive each contingency, hoping for a smooth progression to closing. If all contingencies are met or waived by their deadlines, the contract moves forward to the final closing stages. If conditions are not met, the contract may be terminated, often allowing the buyer to reclaim their earnest money deposit.