When Buying a Home What Does Contingent Mean?

When a home listing shows a “contingent” status, it indicates an accepted offer exists, but the sale is not yet final. This means the contract includes specific conditions that must be met before closing. Contingencies protect both the buyer and seller, allowing either party to withdraw without penalty if the agreed-upon conditions are not fulfilled.

Common Contingency Types

An inspection contingency grants the buyer a specified period, typically 7 to 14 days, to conduct a professional home inspection. The buyer can then negotiate with the seller for repairs, a price reduction, or terminate the contract and receive their earnest money deposit back if issues are severe.

The appraisal contingency ensures the property’s value meets or exceeds the purchase price. Lenders require an appraisal to justify the loan amount. If the appraisal is lower than the sales price, the buyer may renegotiate, pay the difference in cash, or withdraw from the contract.

A financing contingency requires the buyer to secure adequate financing by a certain date, usually within 21 to 45 days. If the buyer cannot obtain loan approval, they can terminate the contract without losing their earnest money. This is important for buyers seeking conventional, FHA, or VA loans.

The sale of buyer’s home contingency makes the new home purchase dependent on the sale of the buyer’s current residence. This protects buyers from carrying two mortgages. If the buyer’s home does not sell within the agreed timeframe, typically 30 to 90 days, the buyer can exit the contract without penalty. This contingency can make an offer less attractive to sellers.

Other conditions can also appear in contracts. A title contingency ensures the property’s title is clear of undisclosed liens or disputes. An attorney review contingency allows legal counsel to review and approve the contract terms within a few business days, typically 3 to 5 days.

What Contingent Means for Other Buyers

A “contingent” listing means an offer is accepted, but the sale is not yet complete due to contract conditions. This status differs from “pending” or “under contract,” though terms are often used interchangeably. A “pending” status generally implies all contingencies are satisfied or waived, and the sale is moving toward closing with a higher likelihood of completion.

For other interested buyers, a “contingent” listing suggests the current deal might still fall through. This can occur if the buyer cannot meet financing requirements, the home inspection reveals significant issues, or the appraisal is too low. While under a contingent contract, sellers generally prefer not to show the home to other buyers, but may agree in certain situations.

It is possible for another buyer to make a backup offer on a contingent home. A backup offer is a legally binding agreement that becomes the primary contract if the initial contingent offer fails to close. This can be an effective strategy in a competitive market, positioning a buyer to quickly step into the primary position if the first deal collapses. The seller typically evaluates backup offers based on terms, price, and the likelihood of closing.

Monitoring the listing status of a contingent property is a common practice for interested buyers. They can instruct their real estate agent to keep a close watch on the property’s status updates. If the contingencies are not met, and the initial contract is terminated, the property may revert to an “active” status, making it available for new offers. This allows buyers to be ready to act quickly if the opportunity arises.

The Process of Satisfying Contingencies

Satisfying contingencies involves specific actions and deadlines for both the buyer and seller to move the sale toward closing. Each contingency has a defined timeframe within the purchase agreement for its fulfillment or removal.

The buyer undertakes several actions to satisfy common conditions. For an inspection contingency, the buyer schedules and pays for a professional home inspection within the agreed-upon period, usually 7 to 10 days. The buyer then submits repair requests or renegotiation proposals to the seller. For a financing contingency, the buyer promptly applies for a mortgage and provides all required documentation to their lender, aiming for loan commitment within 21 to 30 days.

The seller’s role involves responding to buyer requests and cooperating with the process. If the buyer requests repairs after an inspection, the seller can agree to repairs, offer a credit, or decline. If an appraisal is low, the seller may lower the price, or the buyer may pay the difference in cash. These situations often lead to negotiation.

Contingencies can either be waived or fail. A buyer may waive a contingency, proceeding with the purchase without its protection. This is a significant decision; for example, waiving a financing contingency means the buyer is committed even if their loan falls through, risking earnest money. If a contingency cannot be met, such as a low appraisal or loan denial, it fails.

When a contingency fails, it leads to contract termination. In most cases, if terminated due to a failed contingency, the buyer receives their earnest money deposit back. This protects the buyer from financial loss when circumstances beyond their control prevent the sale, as long as they acted in good faith.