What Does It Mean When a Real Estate Listing Is Contingent?
Understand what a contingent real estate listing signifies. Discover how this critical stage influences the home buying and selling process.
When a real estate listing is marked as “contingent,” it indicates a seller has accepted a buyer’s offer, but the sale’s finalization depends on specific conditions. These conditions are stipulations in the purchase agreement that must be met before the transaction proceeds. A contingent status means the contract is not fully binding, and the deal could still change or terminate.
Understanding a Contingent Listing
A contingent listing represents an intermediate stage in the home buying process. It occurs after an offer has been accepted but before the sale is definitively closed. While an agreement is in place, the transaction is not guaranteed to proceed. Contingencies act as a safeguard, allowing parties to withdraw from the contract without penalty if specified conditions are not met. This period allows buyers to conduct due diligence and for sellers to address contractual obligations.
Key Types of Contingencies
Real estate contracts frequently incorporate several common contingencies. A financing contingency allows the buyer to withdraw if they cannot secure loan approval within a specified timeframe, often 30 to 60 days. This provision protects the buyer’s earnest money deposit if their mortgage application is denied.
An inspection contingency grants the buyer the right to have the property professionally inspected for issues. Buyers typically have 7 to 10 days to conduct this inspection and potentially negotiate repairs or credits. If significant issues are found and not resolved, this contingency allows contract termination.
An appraisal contingency ensures the property’s appraised value meets or exceeds the purchase price. Lenders require an appraisal to confirm value. If the appraisal is lower, this clause permits the buyer to renegotiate or exit the agreement. This protects both the buyer from overpaying and the lender from financing an overpriced asset.
A sale of buyer’s home contingency means the new property purchase depends on the successful sale of their current residence. This protects buyers from owning two homes, typically allowing 30 to 90 days for their existing home to sell. If the home does not sell, they can usually terminate the contract without penalty.
Navigating the Contingent Period
Once a listing becomes contingent, both buyer and seller take actions to satisfy the agreed-upon conditions. For a financing contingency, the buyer pursues loan approval, submitting required financial documentation to their lender. The lender processes the mortgage application, verifying income, assets, and creditworthiness. If the loan is approved within the contractual period, the financing contingency is satisfied.
For an inspection contingency, the buyer arranges for a licensed home inspector to examine the property. The buyer reviews the report, which outlines any defects. Depending on findings, the buyer may request repairs, credits, or a price reduction. If an agreement cannot be reached, the buyer may terminate the contract.
For an appraisal contingency, the buyer’s lender orders an independent appraisal. If the appraisal indicates a value lower than the sale price, buyer and seller must decide how to proceed. Options include the buyer covering the gap, the seller reducing the price, or renegotiating terms. If no resolution is found, the buyer has the right to withdraw from the contract, with their earnest money deposit returned.
Paths After Contingency Review
Upon the conclusion of the contingent period, a real estate listing can transition into one of two statuses. If all specified contingencies are met or waived by the buyer, the listing moves to a “pending” status. A pending status indicates the sale is progressing towards closing, with major conditions satisfied. Properties in this stage are on a path to transfer ownership.
Conversely, if one or more contingencies are not fulfilled or waived within the agreed timeframe, the contract may be terminated. Common reasons include a buyer unable to secure financing, unresolved home inspection issues, or a low appraisal without a solution. When a contract terminates due to unmet contingencies, the property returns to an “active” status, available for other buyers. The buyer’s earnest money deposit is returned, provided termination adheres to the contingency clauses.