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If a listing is “contingent,” it means that an offer has been accepted, but the sale will only go through if certain conditions are met. In other words, the offer is “contingent” on those conditions.
Typical conditions include inspection contingencies (in which the sale will go through only after a satisfactory home inspection) or home sale contingencies (in which the sale is conditional on the buyer selling their current home).
Below, we’ll dive into all the details around contingent meaning in real estate.
Key Points
• A “contingent” real estate listing means an offer is accepted, but the sale is conditional on specific requirements being met.
• Common contingencies include home inspection, appraisal, mortgage financing, clear title, and home sale requirements.
• Contingent periods usually last 30 to 60 days, after which the listing moves to “pending” if conditions are met or the deal may fall through.
• Contingencies benefit the buyer by lowering risk but can make an offer less attractive in a competitive seller’s market.
• A “pending” offer means contingencies are largely cleared, a closing date is set, and the sale is near finalization.
Contingent Definition
In real estate, a “contingent” listing is one on which there is an accepted offer — but the offer will only go through under certain circumstances.
What is contingent depends on the type of contingency. For instance, if there’s an inspection contingency, the offer will only go through once the inspection is done (and the buyers are satisfied with the results or negotiations are made over certain repairs).
Financing contingencies are also common, in which the sale is dependent on the buyer’s ability to secure a home loan. If the buyer can’t secure financing, the deal might fall through. So contingent meaning can vary according to the type of contingency.
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How Does a Contingent Offer Work?
In a contingent offer on a house, the buyer pledges a certain purchase price on the house, and the seller agrees to sell it, but both parties understand that the agreement is dependent, or contingent, upon certain conditions being met.
Contingent periods usually last between 30 and 60 days, during which time the conditions must be met. If contingencies are met to satisfaction, the listing will then usually move to “pending,” which indicates that final sale steps (such as verifying mortgage approval and completing legal paperwork) are taking place.
If contingencies are not met before the contingency expiration date, the deal may fall through and the seller may have to re-list the property.
Common Types of Real Estate Contingencies
While there are many different types of deal points that define contingent, here are some of the most common contingent definitions you may find while navigating the market.
Home Inspection Contingency
A home inspection is a professional assessment of the condition of a home, including its structure, plumbing, electrical system, heating and cooling, and more. A home inspection is a normal part of a real estate sale, and an offer can be made contingent on the results of the inspection.
Appraisal Contingency
An appraisal differs from a home inspection in that it assesses the dollar value of the home rather than its physical condition. Again, a buyer might place an offer on a home, contingent on the appraisal showing a certain value. If you’re pursuing an FHA loan backed by the Federal Housing Administration, note that you’ll need to use an FHA appraiser.
Mortgage Contingency
A mortgage or financing contingency, as discussed above, is an offer made on the contingent condition of the buyer being able to secure financing. (For example, the buyer might be prequalified for a mortgage loan, but not yet approved.)
Title Contingency
What is contingent when it comes to the title? A title contingency, sometimes also known as a clear title contingency, means the offer will only go through if the title is found to be clear of issues such as liens, ownership disputes or unpaid taxes. A clear title contingency can help a homebuyer avoid the ramifications of inheriting a title with legal issues attached.
Home Sale Contingency
Again, as mentioned above, a home sale contingency is an offer made on the contingent condition of the buyer selling their existing home (as most must do in order to come up with the funds required to cover the down payment and closing costs, as well as to avoid paying two mortgages at once). If the buyer is unable to find their own buyer, the sale may fall through.
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Contingent vs Pending: What’s the Difference?
It’s important to understand the difference between pending and contingent offers when you’re searching for or buying a home. When an offer is marked “contingent,” it means the deal will fall through if the specific conditions laid out in the contingency don’t come to pass.
A pending offer, on the other hand, is one on which contingencies have largely been cleared and a closing day has been set. However, the transaction still hasn’t been finalized, which means that final approval of financing, background checks, and other legal paperwork may still be in process.
In some instances, a seller may still take back-up offers on a pending or contingent property, but it’s important to understand that an offer is in motion and you may not end up getting the deal. However, if the initial deal does fall through, you may be first in line — and you should be ready to act fast and respond if yours becomes the primary offer.
Tips for Buyers Making a Contingent Offer
Contingencies can help buyers lower their risk by giving you a way out of the deal if certain conditions aren’t met. Of course, they do add one more layer of complication to the real estate deal and can lengthen the amount of time it takes for the sale to go through — so there are both pros and cons to keep in mind.
Here are some tips if you’re making a contingent offer on a home:
• Use contingencies to your advantage. A contingency can help you avoid an unwanted situation, be it buying a home in poor repair or committing to a purchase before your existing home has sold.
• Keep in mind that negotiations can still take place on a contingency. For example, if the inspection doesn’t come back to the buyer’s satisfaction, the seller might offer a price cut or to have certain repairs done rather than letting the sale automatically fall through.
• In a seller’s market, exercise caution with contingencies. If a seller is fielding multiple offers, a contingency does increase friction and can make an offer less appealing — so proceed with caution when you make your offer.
• Seek out mortgage preapproval. Early in your home search process, beginning to line up financing can help things move more smoothly when you get down to the wire on a purchase. Explore mortgage rates and consider applying for preapproval with one or more lenders.
The Takeaway
Knowing what does contingent mean can be an important factor in home-buying success. “Contingent” means that an offer on a home for sale will only go through if certain conditions, or contingencies, are met.
Contingent offers can help protect buyers and offer “outs” to make a deal less risky. However, in a seller’s market with a lot of competition among hopeful homebuyers, contingencies may make an offer less attractive to the seller.
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FAQ
What does it mean when a house is listed as contingent?
A house listed as contingent has an accepted offer, but the offer is conditional: The deal will only go through if certain terms are met. To further define contingent, it helps to look at an example. A mortgage contingency means that a sale will only be completed if the buyer is able to successfully get approved for a mortgage to pay for the home.
Can you still make an offer on a contingent home?
Yes, you can. On a contingent listing, a closing date has not yet been set. However, your offer will likely only be considered if the contingent offer falls through due to an unmet condition.
How long does a home stay in contingent status?
A contingency period usually lasts for 30 to 60 days. However, contracts may vary, and contingency periods may be shorter or longer depending on the specific circumstances.
What is a kick-out clause?
A kick-out clause allows a seller to continue to field new offers on a home even after accepting an offer with contingencies. If you’re making an offer with contingencies, accepting a kick-out clause could sweeten your offer by allowing the buyer to continue to show the home and potentially kick you out if they get an offer without contingencies. However, if such an offer materializes, you’ll usually be given the option to waive your contingencies to proceed with the deal.
Is it better to waive contingencies when making an offer?
If you have serious doubts about the condition of the home you’re buying, or your ability to sell your existing home or secure financing, a contingent offer can help you get in the game while lowering your risk level in the deal. However, if you’re in a competitive seller’s market, a contingency can make your offer less attractive to the seller than other offers without contingencies.
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