What Does It Mean When a House Is Listed as Contingent?

When a house is listed as contingent, it signifies a specific stage in the real estate transaction process. This status indicates that a seller has accepted an offer from a buyer, but the finalization of the sale remains dependent on certain conditions being fulfilled. These conditions, known as contingencies, are typically outlined within the purchase agreement and serve to protect both parties involved. While the property is technically under contract, the presence of contingencies means the deal is not yet complete and could still encounter obstacles before reaching the closing stage.

What “Contingent” Means in Real Estate

In real estate, “contingent” identifies a property that has an accepted offer, but the sale’s progression hinges on predefined requirements. It signals that a buyer and seller have reached an agreement on the purchase price and general terms, yet the contract is not unconditionally binding. This status serves as an intermediate step between an “active” listing, where a property is openly available for offers, and a “sold” status, which indicates a completed transaction. The contingent status provides a window for due diligence and for specified conditions to be met before the sale can proceed to a final close.

A contingent listing means the seller has committed to the accepted offer, often removing the property from active marketing to a significant degree. However, because the sale is conditional, there remains a possibility that the deal may not close if the stipulated conditions are not satisfied. This protects the buyer by allowing them to withdraw from the agreement without penalty if certain issues arise. For sellers, it means their property is off the general market while the buyer works to fulfill the contract’s terms.

Types of Contingencies

Real estate contracts incorporate common contingencies to safeguard buyer interests. An inspection contingency allows the buyer to hire a professional home inspector. If the inspection uncovers defects, the buyer can negotiate with the seller for repairs or a price adjustment, or terminate the contract and receive their earnest money deposit back.

A financing contingency protects the buyer if they cannot secure loan approval. This clause specifies a timeframe for the buyer to obtain a mortgage commitment. If the buyer’s loan application is denied or the property’s appraisal value is less than the agreed-upon price, the buyer can terminate the contract without losing their earnest money.

The appraisal contingency ensures the home’s appraised value meets or exceeds the purchase price. Lenders will not provide a mortgage for more than a property’s appraised value, so this contingency allows the buyer to renegotiate the price or cancel the deal if the appraisal is low. A sale of buyer’s home contingency makes the purchase dependent on the buyer selling their current property within a specified period. This protects buyers who rely on proceeds from their existing home sale.

A title contingency ensures the seller has clear legal ownership, free from undisclosed liens or disputes. A title search verifies ownership history and identifies potential issues. If the search reveals problems the seller cannot resolve, the buyer has the right to withdraw from the contract.

The Contingency Period

The contingency period is the agreed-upon timeframe for the buyer to satisfy conditions in the purchase agreement. This phase begins once the seller accepts the offer and the contract is signed. During this period, the buyer undertakes steps to ensure the property meets expectations and financing is secured.

During the inspection contingency period, the buyer arranges for a professional home inspection. The inspector examines the property’s structural integrity, systems, and components. The buyer receives a detailed report highlighting necessary repairs or concerns. Based on these findings, the buyer can request the seller to address specific issues or offer credits for repairs.

If a financing contingency is in place, the buyer submits a mortgage application to their lender. The lender verifies income, assets, and creditworthiness to secure a loan commitment. An appraisal of the property is also conducted by the lender to confirm its market value, which is a part of the financing process. Buyer and seller communicate through their real estate agents to track progress and ensure contractual deadlines are met.

When Contingencies Are Not Met

When contingency conditions are not satisfied within the specified timeframe, the contract provides for resolution or termination. If a buyer cannot secure financing or the home inspection reveals issues the seller will not address, the buyer has the right to withdraw. Termination must occur through formal written notice to the seller, adhering to contract procedures.

If a contract terminates due to unmet contingencies, the buyer’s earnest money deposit is returned. Earnest money, a good-faith deposit, is held in an escrow account. If the buyer terminates within the agreed-upon contingency period and according to contract terms, they are entitled to a full refund. If a buyer terminates for reasons not covered by a contingency or after the period expires, they risk forfeiting their earnest money.

Should the contract terminate, the property returns to an active listing status. This allows the seller to seek new offers. Communication between all parties, through their real estate agents, ensures the process of contract termination and earnest money release is handled correctly.