What Does Contingent Mean When Looking at Houses?

When searching for a home, prospective buyers often encounter listings marked with various statuses, and “contingent” is a common one. Understanding what this term signifies is important for anyone navigating the real estate market. It indicates a particular stage in the home-buying journey, affecting both buyers and sellers as they move toward a completed transaction.

Defining Contingent Status

A “contingent” status on a property listing means an offer has been accepted by the seller, but the sale is not yet complete because specific conditions must be met. These conditions, known as contingencies, are agreed upon by both the buyer and seller and are included in the purchase agreement. This status differentiates a property from one that is “pending,” which generally means all conditions have been satisfied or waived, and the transaction is closer to finalization.

Common Contingency Conditions

Real estate contracts frequently include several types of contingencies. An inspection contingency, for example, allows the buyer to have the home professionally evaluated for defects within a specified period, often 7 to 14 days after the offer is accepted. This enables them to negotiate repairs, a price reduction, or even withdraw their offer if significant issues are discovered.

Another common condition is the appraisal contingency, which makes the sale dependent on the home appraising for at least the agreed-upon purchase price. Lenders typically require an appraisal to confirm the property’s value. If the appraisal is lower than the sale price, the buyer may renegotiate, pay the difference in cash, or terminate the contract.

A financing contingency provides the buyer with a timeframe, commonly 30 to 60 days, to secure the necessary mortgage loan. This allows them to cancel the deal without penalty if they are unable to obtain financing. Lastly, a sale of buyer’s home contingency means the purchase is dependent on the buyer successfully selling their current residence. This can include a “kick-out clause,” which allows the seller to accept another offer if the initial buyer cannot sell their home quickly, giving the first buyer a short period to remove their contingency or risk losing the property.

The Contingency Period

Once a purchase offer is accepted and the contract is signed, the contingency period begins. This timeframe, which can vary but often ranges from 30 to 60 days, allows both the buyer and seller to fulfill their contractual obligations. During this period, the buyer works to satisfy the conditions outlined in the agreement.

For instance, if an inspection contingency is in place, the buyer arranges for qualified home inspectors to assess the property’s structural integrity, systems, and overall condition. Any findings from these inspections are then typically presented to the seller for potential negotiation regarding repairs or credits. In the case of a financing contingency, the buyer collaborates with their lender, submitting necessary financial documents for loan underwriting and approval. The lender also orders an appraisal of the property to determine its market value, a process that can take about 10 to 14 days.

If Contingencies Are Not Met

When the conditions of a contingent sale are not fulfilled or waived by the deadline, several outcomes are possible. The purchase agreement may be terminated if, for example, the home inspection uncovers significant issues the parties cannot resolve, the appraisal value is too low, or the buyer is unable to secure financing.

If the buyer terminates the contract due to an unfulfilled contingency and adheres to the agreement’s terms, their earnest money is generally returned. However, if the buyer defaults on the contract without a valid contingency reason, they may forfeit the deposit to the seller. In some situations, instead of termination, the parties may attempt to renegotiate the terms of the contract to address the unmet condition. If renegotiation is unsuccessful, the property usually reverts to an “active” status on the market.