What Is Contingent in Real Estate?

When a property listing is marked as “contingent,” it means an offer has been accepted, but the final sale is not yet guaranteed. The agreement is conditional upon specific requirements, known as contingencies, being met within a defined timeframe. If these conditions are not satisfied, the contract may be terminated without penalty, often allowing the buyer to reclaim any earnest money deposit.

What “Contingent” Means for a Listing

A “contingent” listing means a home is under contract, but its sale depends on specific conditions being satisfied. This status differs from an “active” listing, where the property is fully available for offers, or “pending,” which implies all conditions have been met and the sale is moving toward closing. While “pending” listings are typically not shown, a contingent listing may still allow for showings and backup offers, depending on the terms agreed upon.

For buyers, a contingent status suggests that while an offer has been accepted, the deal could fall through, potentially bringing the property back onto the market. A backup offer might be considered if the initial contract’s contingencies are not met. For sellers, a contingent status means they have a buyer, but they must wait for the specified conditions to be fulfilled before the sale is complete.

Key Contingency Types

Real estate contracts frequently include common contingency types. These clauses allow a party to withdraw from the contract without penalty if certain conditions are not met.

The inspection contingency allows the buyer to conduct professional home inspections within a specified timeframe, typically 7 to 14 days after offer acceptance. If the inspection reveals significant issues, the buyer can request repairs, negotiate a price reduction, or, if an agreement cannot be reached, terminate the contract and receive their earnest money back.

An appraisal contingency stipulates that the property must appraise for at least the agreed-upon sale price. If the appraisal comes in lower than the purchase price, the buyer can renegotiate the price with the seller, pay the difference in cash, or withdraw from the contract without losing their earnest money. This clause is important for buyers relying on mortgage financing, as it ensures the loan amount aligns with the property’s market value.

The financing, or mortgage, contingency grants the buyer a specific period, usually between 30 and 60 days, to secure the necessary mortgage loan. This protects the buyer from being obligated to purchase the home if they are unable to obtain financing. If the buyer’s loan application is denied within this timeframe, they can typically terminate the agreement and recover their earnest money deposit. A pre-approval letter does not guarantee a final loan approval.

The sale of existing home contingency applies when a buyer needs to sell their current residence to finance the new purchase. This allows the buyer to back out of the contract if their existing home does not sell within a specified period. While this offers significant protection to the buyer, sellers may be less inclined to accept offers with this contingency, as it introduces uncertainty and potential delays.

Navigating the Contingency Period

Once a contract becomes contingent, a defined period begins during which the buyer actively works to satisfy the agreed-upon conditions. Buyers typically schedule inspections, apply for loans, and arrange appraisals within tight deadlines, often ranging from several days to a few weeks for each specific contingency. For example, home inspection periods commonly last 7 to 10 days, while financing contingencies often extend for 30 to 60 days. The buyer’s real estate agent helps coordinate these activities and ensures adherence to the contractual timeline.

Clear communication between all parties—buyers, sellers, and their respective agents—is essential throughout this phase. If issues arise, such as significant repairs identified during an inspection or a low appraisal, the parties may renegotiate the terms of the sale. This could involve the seller agreeing to repairs, a price reduction, or a credit to the buyer at closing. If an agreement cannot be reached or a contingency cannot be satisfied, the contract may be terminated.

When contingencies are successfully met or waived, the transaction moves closer to closing, often transitioning the listing status to “pending.” If a contingency is not met, and the buyer properly exercises their right to terminate the contract within the stipulated timeframe, they are typically entitled to a refund of their earnest money deposit. However, if a buyer fails to meet deadlines or attempts to withdraw for reasons not covered by a contingency, they may risk forfeiting their earnest money to the seller.