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

A ‘contingent’ status on a house for sale means an offer has been accepted by the seller, but the sale’s finalization depends on specific conditions being met. These conditions, known as contingencies, are clauses written into the purchase agreement. They allow either the buyer or seller to withdraw from the contract without penalty if the stipulated conditions are not satisfied within an agreed-upon timeframe.

Understanding Contingent Status

A contingent status signifies a mutual agreement has been reached between the buyer and seller on the home sale’s price and terms. The contract remains conditional. The property will typically still be listed as ‘for sale’ but with a ‘contingent’ or similar designation. This status provides a framework for both parties to proceed with necessary verifications and approvals before the sale becomes legally binding.

Contingencies protect both buyers and sellers from unforeseen issues. For buyers, they offer an opportunity to conduct due diligence and ensure the property meets their expectations and financial capabilities. For sellers, it means an accepted offer, but the deal’s progression is tied to the successful fulfillment of these agreed-upon conditions.

Common Contingency Types

Common contingencies are frequently included in real estate contracts to protect the buyer. A financing contingency makes the sale dependent on the buyer securing a mortgage loan. This clause typically grants the buyer 30 to 60 days to obtain loan approval, allowing them to withdraw from the deal with their earnest money deposit if financing falls through.

An appraisal contingency ensures the home’s appraised value meets or exceeds the agreed-upon sale price. If the appraisal comes in lower, the buyer can renegotiate the price, cover the difference, or terminate the contract without losing their earnest money. An inspection contingency gives the buyer the right to have the property professionally inspected for any issues. If significant problems are discovered, the buyer can negotiate repairs, a price reduction, or cancel the contract, often within a 7- to 10-day period.

A home sale contingency protects buyers who need to sell their current property before purchasing a new one. This prevents being burdened with two mortgage payments if their existing home does not sell within a specified timeframe. If the buyer’s home does not sell, this contingency allows them to exit the contract.

Navigating the Contingent Period

Once an offer with contingencies is accepted, a specific timeframe, known as the contingency period, begins. This period, ranging from days to weeks, is outlined in the purchase contract and allows both parties to fulfill their obligations. For example, a typical contingency period for inspections might be around 17 days, while loan contingencies could extend to 21 days or more.

During this time, the buyer has several responsibilities, including scheduling and completing agreed-upon inspections, such as a general home inspection, pest inspection, or radon testing. The buyer must also actively pursue their mortgage application, providing financial documentation to their lender. The seller’s responsibilities include granting access to the property for inspections and appraisals and being prepared to negotiate repair requests from inspection findings.

As each contingency is met, the buyer typically provides written notice to the seller, waiving that contingency. If a contingency cannot be met, or if the buyer is not satisfied with the results, they can request an extension, renegotiate terms, or, if the contract allows, terminate the agreement and receive their earnest money deposit back. If the buyer misses a contingency deadline without waiving it or getting an extension, the seller may issue a ‘Notice to Perform,’ giving the buyer a short window, often 48 hours, to act before the seller can cancel the contract.

Implications for Market Participants

For buyers, a contingent listing means an offer has been accepted, but the deal is not yet final and could fall through if contingencies are not met. Buyers can still make a backup offer on a contingent home, which may be considered by the seller if the initial contract terminates. While there might be less competition, making an offer on a contingent home does not necessarily guarantee a discounted price.

For sellers, a contingent status means they have an accepted offer, but the sale is not guaranteed until all conditions are satisfied. Depending on the contract terms, sellers may or may not continue to show the property or accept backup offers. Some contracts might include a ‘kick-out clause,’ which allows the seller to entertain and accept a new offer, giving the initial buyer a limited time to remove their contingencies or lose the deal.