What Does It Mean When a Home for Sale Is Contingent?

What “Contingent” Means in Real Estate

When a home is listed as “contingent,” 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. The property is under contract, but the transaction is not yet complete.

This temporary status safeguards both buyer and seller. If conditions are not satisfied within a specified timeframe, either party may terminate the contract without penalty.

Common Types of Contingencies

Several types of contingencies are frequently included in real estate contracts, each serving a distinct purpose.

The financing contingency means the buyer’s ability to purchase the home depends on securing a mortgage loan. This clause typically specifies a timeframe, often 30 to 60 days, for the buyer to obtain loan approval. If the buyer cannot secure financing, this contingency allows them to withdraw from the contract and typically retain their earnest money deposit.

The appraisal contingency stipulates that the home must appraise at or above the agreed-upon sale price. Lenders often require an appraisal to confirm the property’s value aligns with the loan amount. If the appraisal comes in lower than the purchase price, the buyer may renegotiate, cover the difference, or terminate the contract without losing their deposit.

The inspection contingency allows the buyer to have the home professionally inspected for defects. Buyers typically have 7 to 10 days to conduct this inspection after the offer is accepted. If significant problems are discovered, the buyer can request repairs, negotiate a lower price, or cancel the contract. This clause provides an opportunity to understand the home’s condition and avoid unexpected repair costs.

Finally, a sale of existing home contingency means the buyer’s purchase of the new property is conditional upon the successful sale of their current home. This protects buyers from owning two homes simultaneously and facing dual mortgage payments. While beneficial for the buyer, sellers may find such offers less appealing due to the added uncertainty and potential for delays.

The Contingency Period in Action

Once a purchase agreement with contingencies is accepted, a specific timeframe, known as the contingency period, begins. This period typically ranges from 10 to 60 days, depending on the type of contingency and local market practices. During this time, both the buyer and seller undertake specific actions to satisfy the agreed-upon conditions.

For the buyer, this period involves arranging for various assessments, such as scheduling a home inspection and coordinating the appraisal. They will also actively pursue loan approval, providing all necessary documentation to their lender. The buyer’s objective is to ensure all conditions are met to their satisfaction before the contingency deadlines expire.

The seller’s role during this phase often involves facilitating access for inspections and appraisals. If the buyer requests repairs based on the inspection report, the seller must decide whether to agree to the repairs, offer a credit, or decline the request. If conditions are met or waived by the buyer, the sale progresses towards closing. If conditions are not met and the buyer chooses to terminate, the deal may fall through, and the earnest money deposit is typically returned.

What It Means for Other Buyers

For other prospective buyers, a home listed as “contingent” indicates an offer has been accepted, but the sale is not yet finalized. While the property is under contract, opportunities are not entirely closed. Sellers may still consider other offers, especially if uncertain about the current buyer’s ability to fulfill contingencies.

One option for other buyers is to submit a backup offer. A backup offer is a legally binding contract that positions a second buyer to purchase the home if the initial contract fails to close. If the primary deal falls through due to unfulfilled contingencies, the accepted backup offer automatically moves into the primary position, potentially saving the seller from re-listing the property.

Some contingent contracts may also include a “kick-out” clause, particularly when the initial buyer has a sale of existing home contingency. This clause allows the seller to continue marketing the home. If the seller receives a new, non-contingent offer, they can activate the kick-out clause, giving the original buyer a limited timeframe, often 24 to 72 hours, to remove their contingency and proceed with the purchase or withdraw.