What Does Sale Contingent Mean in Real Estate?

In real estate, various property statuses are common. One such status, “sale contingent,” means a property is under contract but has not yet reached its final sale. Understanding this term is important for both buyers and sellers. This status indicates specific conditions must be satisfied before the transaction can be completed, making it distinct from a fully finalized sale.

Defining Sale Contingent Status

A “sale contingent” status signifies a property has an accepted offer, but the sale’s completion depends on specific conditions outlined in the purchase agreement. Until these conditions are met, the sale is not considered final. The property, while under contract, remains active on the market, though with limitations on how it can be marketed.

This status differs from a “pending” status, where all contingencies are generally satisfied, and the transaction is further along in the closing process. The primary reason a property is listed as “sale contingent” often relates to the buyer’s need to sell their existing property. If the conditions are not met, the sale can fall through, and the property may return to an active listing status.

Understanding Sale of Buyer’s Home Contingencies

The “sale of buyer’s home” contingency is a common reason for a property to be in a “sale contingent” status. This clause states that a buyer’s ability to purchase a new home is conditional upon the successful sale and closing of their current residence. This arrangement protects the buyer from the financial burden of owning two properties simultaneously or managing multiple mortgage payments.

A key component often accompanying this contingency is the “kick-out clause,” also known as a “right of first refusal” or “escape clause.” This clause allows the seller to continue marketing their property and accept backup offers, even while under contract with the contingent buyer. If the seller receives another offer, particularly one without contingencies, they can invoke the kick-out clause. The original contingent buyer then has a specified period, typically 24 to 72 hours, to decide whether to remove their home sale contingency and proceed with the purchase, or to withdraw from the contract. If the original buyer fails to remove the contingency within this timeframe, the seller can then proceed with the new offer, and the original contract is terminated.

Seller’s Perspective During a Contingent Sale

For a seller whose property is under a sale contingent contract, particularly one with a kick-out clause, maintaining market visibility is advisable. This allows the seller to continue attracting potential buyers and solicit backup offers. Should a new, non-contingent offer be presented, the seller can formally notify the original contingent buyer.

The notice initiates a short timeframe, typically 24 to 72 hours, for the original buyer to either waive their home sale contingency or release the seller from the contract. If the original buyer chooses to withdraw, their earnest money deposit is usually returned, and the seller is free to accept the new offer. This approach provides the seller with flexibility, reducing the risk of a prolonged sales process if the initial buyer’s home does not sell within the agreed-upon period.

Buyer’s Perspective During a Contingent Sale

For a buyer who has made a contingent offer, actively marketing and selling their current home within the timeframe stipulated in the purchase agreement is key. This period often ranges from 30 to 90 days, depending on the specific terms of the contract. Cooperating closely with their real estate agent to expedite their home sale is important, ensuring all necessary steps, from listing to closing, are efficiently managed.

If the seller invokes a kick-out clause due to a new offer, the buyer faces a decision within a short window, typically 24 to 72 hours. The buyer must either commit to purchasing the new home by removing their home sale contingency, potentially by securing alternative financing, or relinquish the contract. This situation necessitates financial preparedness to avoid potential penalties, such as forfeiting earnest money, if they cannot proceed without the sale of their current home.