What Does It Mean When a Home Is Contingent?

When a home is listed as “contingent” in real estate, it signifies that a seller has accepted an offer from a buyer, but the sale is not yet final. This status indicates that the transaction is dependent upon certain conditions being met by either the buyer or the seller, or both, before the sale can proceed to closing. This status differs from “active” listings, which are openly available, or “pending” listings, which are closer to closing with most conditions typically satisfied.

Common Home Sale Contingencies

A contingency in a real estate contract functions as a protective clause, allowing either the buyer or seller to withdraw from the agreement without penalty if specified conditions are not met. The most frequently encountered contingencies include financing, inspection, appraisal, and home sale clauses.

A financing contingency protects the buyer, making the purchase dependent on their ability to secure a mortgage loan for the property. This means if the buyer’s loan application is denied, they can typically terminate the contract and receive their earnest money deposit back. An inspection contingency allows the buyer to conduct a thorough home inspection and, based on the findings, negotiate repairs or request credits from the seller. If significant issues are discovered that cannot be resolved, the buyer may have grounds to cancel the agreement.

An appraisal contingency ensures that the property’s appraised value meets or exceeds the agreed-upon purchase price. Lenders require appraisals to confirm the collateral’s value, and if the appraisal comes in lower than the sale price, the buyer may renegotiate the price or withdraw from the contract. A home sale contingency requires the buyer to successfully sell their current home before they are obligated to purchase the new property. This type of contingency is often included when a buyer needs the proceeds from their existing home sale to finance their new purchase.

The Contingency Period Process

Once an offer with contingencies is accepted, a specific timeframe, known as the contingency period, begins. For a financing contingency, the buyer typically submits all necessary financial documentation to their lender to secure formal loan approval, often within a period ranging from 15 to 30 days. The lender then processes the application, verifies financial information, and prepares for final approval.

For an inspection contingency, the buyer usually arranges for a professional home inspection to be conducted within a short window, often 7 to 14 days after contract acceptance. Following the inspection, the buyer reviews the report and may present a request for repairs or credits to the seller. The appraisal process involves the buyer’s lender ordering an independent appraisal of the property, which typically occurs within a few weeks of the contract date. The appraiser assesses the home’s value based on comparable sales and property condition.

If a home sale contingency is in place, the buyer actively markets their current property and works to secure a buyer for it within the stipulated timeframe, which can be several weeks or even months.

What Contingent Means for You

For a prospective buyer still searching for a home, a “contingent” listing means the property is not fully off the market, but it is effectively spoken for by another buyer. While you might still be able to view the home, it generally indicates that a primary offer is in place and being processed. In some cases, sellers may still accept backup offers, which would become the primary contract if the initial contingent deal falls through.

For the seller, having a home under a contingent contract provides a degree of security, as an offer has been accepted. However, it also carries the risk that the conditions may not be met, potentially leading to the contract’s termination. Sellers often continue to market their property, perhaps with a “backup offers welcome” note, to attract other potential buyers in case the primary deal fails.

The contingent status is distinct from “active,” where a home is fully available for offers, and “pending,” which typically means all contingencies have been removed, and the sale is progressing towards closing.

Outcomes of a Contingent Offer

The period of contingency concludes with one of two primary outcomes. The most favorable result occurs when all conditions stipulated in the contract are successfully met or formally waived by the parties involved. For instance, the buyer’s loan is approved, the home inspection yields satisfactory results or agreed-upon repairs, and the appraisal matches or exceeds the purchase price. When all contingencies are satisfied, the contract typically transitions to “pending” status, signifying that the sale is moving forward towards the final closing.

Conversely, if one or more contingencies are not met or waived within the agreed-upon timeframe, the contract may terminate. For example, if the buyer’s loan is denied, significant issues arise from the inspection that cannot be resolved, or the appraisal comes in too low, the buyer can typically walk away without losing their earnest money deposit. In such cases, the home usually returns to an “active” status on the market, allowing the seller to entertain new offers from other buyers.

Some contingent contracts include a “kick-out clause,” which permits the seller to continue marketing the property and accept a stronger, non-contingent offer. If a new offer is received, the original buyer with the kick-out clause is given a short period, often 24 to 72 hours, to either remove their contingencies or allow the new offer to take precedence. This clause offers sellers more flexibility and security during the contingency period, particularly with home sale contingencies.