What Does Real Estate Contingent Mean?

When a property is listed as “contingent” in real estate, it signals that an offer has been accepted by the seller, but the sale is not yet finalized. These conditions, known as contingencies, must be satisfied within an agreed-upon timeframe before the sale can proceed to closing.

Understanding the Contingent Status

The contingent status in real estate signifies that a legally binding purchase agreement is in place, but its ultimate finalization relies on specific conditions being fulfilled by either the buyer or the seller. These conditions are typically outlined within the contract and must be met within a predefined period. During this time, the property is generally considered off the active market for new, non-contingent offers, yet it is not formally sold.

Contingencies serve as protective measures for both parties involved in the transaction. They provide an opportunity for certain circumstances to be addressed and verified before the sale becomes fully binding, preventing potential financial loss or unforeseen issues. If the specified conditions are not met, the contract may be terminated, allowing the buyer to withdraw without penalty and reclaim any earnest money deposit.

Common Contingency Types

Several common types of contingencies are frequently included in real estate contracts, each serving a distinct purpose in protecting the buyer or seller. A financing contingency makes the sale dependent on the buyer securing a mortgage loan. This clause typically grants the buyer a specified period to obtain loan approval, protecting them from being obligated to purchase if financing falls through. If the buyer cannot secure the necessary funds, they can typically withdraw from the deal without penalty and receive their earnest money back.

An inspection contingency allows the buyer to have the property professionally inspected for any issues. Buyers typically have a specified period to conduct inspections and can then negotiate repairs with the seller, request a price reduction, or withdraw from the contract if significant problems are found. An appraisal contingency ensures the sale is dependent on the property appraising for at least the purchase price. Lenders typically require an appraisal to ensure the home’s value supports the loan amount, protecting the buyer from overpaying. If the appraisal comes in low, the buyer may renegotiate the price or terminate the contract without losing their earnest money.

A home sale contingency means the buyer’s ability to purchase the new property is conditional on the successful sale of their current home. This clause protects buyers from carrying two mortgages simultaneously. While beneficial for the buyer, sellers may view offers with this contingency as less appealing due to the added uncertainty and potential for delays.

Navigating a Contingent Sale

When a property is under a contingent contract, both buyers and sellers have specific roles and considerations. For buyers, this means actively working to fulfill the conditions within the agreed-upon timeline, such as completing inspections, securing loan approval, or selling their current home. If another buyer is interested in a property that is already contingent, they might still have an opportunity to make a backup offer, especially if the initial conditions are not met. In some cases, a seller might include a “kick-out clause” in a home sale contingency, allowing them to continue marketing the property and accept a stronger offer if the first buyer doesn’t remove their contingency within a short notice period, typically 48-72 hours.

For sellers, accepting a contingent offer means maintaining obligations during the contingency period, such as providing access for inspections and appraisals. Fulfilling contingencies generally involves the buyer providing documentation, like a mortgage commitment letter, or signing off on inspection results. If a contingency is not met, the contract may be terminated, and the buyer typically receives their earnest money deposit back. However, if a buyer fails to meet the terms without proper notification, they risk forfeiting their earnest money.