What Does It Mean for a House to Be Contingent?

When a house is listed as “contingent,” a seller has accepted an offer, but the sale is not yet final. This status indicates the transaction depends on certain conditions being met before closing. It is a common occurrence in real estate transactions.

Understanding Contingencies

A real estate contingency is a specific condition that must be satisfied for a purchase contract to become legally binding and for the sale to move forward. These clauses are typically included in the purchase agreement, outlining a defined timeframe for fulfillment. Contingencies protect both buyer and seller, allowing either party to withdraw without financial penalty if the specified conditions are not met.

The “contingent” status differs from other common real estate labels. An “active” listing means the property is still on the market and no offer has been accepted. A “pending” status indicates all contingencies have been removed, and the sale is moving directly towards closing, making it less likely to fall through than a contingent deal. While contingent, the listing remains active because the sale could still fall through.

Common Contingency Types

Real estate transactions frequently incorporate several types of contingencies, each designed to protect specific interests.

A financing contingency allows the buyer to withdraw if they are unable to secure the necessary mortgage loan within a specified timeframe. This period typically ranges from 30 to 60 days. If the buyer’s loan is not approved, this contingency protects their earnest money deposit, allowing them to cancel the contract without penalty. An appraisal contingency stipulates the property must appraise for at least the agreed-upon sale price. Lenders typically require an appraisal to ensure the loan amount does not exceed the home’s value. If the appraisal comes in low, the buyer can renegotiate the price or withdraw.

An inspection contingency grants the buyer the right to have the home professionally inspected for defects. This inspection usually occurs within 7 to 10 days after the offer is accepted. If the inspection reveals significant issues, such as structural damage or problems with major systems, the buyer can negotiate repairs or credits, request a price reduction, or terminate the contract. This clause allows buyers to understand the property’s condition before finalizing the purchase.

A sale of existing home contingency means the buyer’s purchase depends on the successful sale of their current home. This protects the buyer from the financial burden of owning two homes simultaneously. Sellers may include a “kick-out clause,” allowing them to continue marketing the property and accept other offers. If a better offer arises, the original buyer is given a short period to remove their home sale contingency and proceed, or the seller can move forward with the new offer.

A title contingency ensures the seller has clear legal ownership, free from undisclosed liens, claims, or disputes. A title company verifies this, protecting the buyer from financial losses due to ownership issues. If title problems are discovered, the buyer can negotiate solutions or exit the deal without penalties. For properties within homeowners’ associations (HOAs), an HOA document review contingency allows buyers to examine the HOA’s rules, financial statements, and covenants. This review helps buyers understand the community’s regulations, financial health, and potential future expenses.

Practical Implications for Buyers and Sellers

When a house is listed as contingent, it presents considerations for both buyers and sellers. For buyers interested in a property under a contingent contract, the home is not yet definitively sold. The existing offer is subject to conditions, and if those fail, the house could return to the market.

A buyer may consider making a “backup offer” on a contingent home. A backup offer is a legally binding contract that positions a second buyer to purchase the home if the initial offer falls through. This can be beneficial in competitive markets, allowing a buyer to be next in line. Buyers should stay informed about the property’s status, as the primary deal’s failure can quickly move a backup offer into primary position.

For sellers, while an offer has been accepted, the sale is not guaranteed until all contingencies are removed. The contingent offer may fall through, necessitating putting the house back on the market. Sellers must monitor contingency timelines and fulfill contract obligations.

Contingencies affect the timeline of a real estate transaction. The contingency period can vary. Clear communication among all parties, including buyers, sellers, and their agents, is important to navigating the contingent status.