What Does It Mean When a House Is Contingent?

When a house is listed as “contingent,” it indicates that a seller has accepted an offer from a buyer, but the finalization of the sale depends on certain conditions being met. These conditions, known as contingencies, are typically outlined in the purchase agreement. The presence of contingencies means the transaction is not yet a done deal and could still fall through if the specified requirements are not satisfied. This status provides a layer of protection for both the buyer and the seller as they move through the home-buying process.

Understanding Contingent Status

The term “contingent” in real estate signifies that a contract is in place, but its completion hinges on predefined conditions. This differs from an “active” listing, where a property is still on the market without an accepted offer. Once all contingencies are met or waived, the property moves to a “pending” status, indicating the sale is closer to closing. A “sold” status means the transaction has fully completed, and ownership has transferred.

A property remains contingent because the accepted offer includes specific clauses that must be fulfilled before closing. These clauses protect the buyer, allowing them to withdraw from the contract without penalty if the conditions are not met. This interim period is for due diligence and financial arrangements.

Common Real Estate Contingencies

Real estate transactions frequently incorporate several types of contingencies.

Financing Contingency

This makes the sale dependent on the buyer securing a loan for the property. This clause typically grants the buyer a period to obtain mortgage approval. If the buyer’s loan application is denied, this contingency allows them to cancel the contract and receive their earnest money deposit back.

Appraisal Contingency

This ensures the property’s appraised value meets or exceeds the agreed-upon purchase price. Lenders will not finance more than a home’s appraised value. If an appraisal comes in lower than the sales price, the buyer can renegotiate the price, cover the difference in cash, or withdraw from the deal.

Inspection Contingency

This grants the buyer the right to have the home professionally inspected for any issues. Buyers have a specific timeframe to conduct inspections. If significant problems are discovered, the buyer can request repairs, negotiate a price reduction, or cancel the contract and receive their earnest money back.

Sale of Buyer’s Home Contingency

This means the buyer’s purchase of the new home is contingent on the successful sale of their current property. This provision is useful for buyers who cannot manage two mortgage payments simultaneously. Sellers often include a “kick-out clause,” allowing them to continue marketing the property and accept a better offer if the initial buyer does not meet deadlines to remove their home sale contingency.

The Contingency Period

Once an offer with contingencies is accepted, the transaction enters a defined contingency period. This timeframe is dedicated to fulfilling the agreed-upon requirements. During this period, the buyer undertakes steps such as applying for a mortgage, scheduling and completing home inspections, and obtaining an appraisal.

As each contingency is satisfied, the buyer formally “removes” or “waives” it. If any contingency cannot be met, such as a low appraisal or significant inspection issues, the buyer has the contractual right to terminate the agreement without financial penalty. This can lead to the property returning to the market.

Navigating a Contingent Property

For prospective buyers interested in a contingent home, it is possible to inquire about the specific conditions. Buyers can ask if backup offers are being accepted, which can position them to purchase the home if the primary deal falls through. Understanding the nature of the contingencies can help a backup buyer gauge the likelihood of the current transaction’s success.

Sellers managing a contingent offer should monitor the buyer’s progress in meeting the outlined conditions. If a home sale contingency is involved, sellers may continue marketing their property, especially if a kick-out clause is in place, to attract backup offers.