Key Highlights
- A contingent offer means a seller has accepted a buyer’s offer, but specific conditions must be met for the sale to finalize.
- This listing status doesn’t mean the house is sold; there’s still a chance for other buyers if the first deal falls through.
- Common conditions include a successful home inspection, financing approval, an appraisal contingency, and a home sale contingency.
- Your real estate agent can help you understand the specific contingencies and decide if making a backup offer is a good idea.
Introduction
Have you ever been scrolling through listings and found the perfect house, only to see its status is “contingent”? It can be a confusing moment in your real estate journey. Does it mean the house is sold? Or is there still a chance? Understanding what a contingent offer means is key for any homebuyer. It could open up an opportunity you might have otherwise missed. This guide will break down what this term means for you and your home search.
What Does ‘Contingent’ Mean on a House Listing?
So, what does contingent mean when you see it on a house listing? Simply put, it signifies that the seller has accepted an offer, but the home purchase is dependent on certain conditions being met. The sale is not yet final.
For a buyer, a contingent house is in a waiting period. If the conditions, or “contingencies,” in the contract are not satisfied, the deal can fall apart. This means the property could come back on the market, giving you a potential opening.
Definition of Contingent in Real Estate
In the world of real estate, a contingent offer is a standard part of the process. It means a buyer and seller have agreed on a price, but the final sale is subject to specific criteria outlined in the purchase agreement. This conditional agreement protects both parties involved in the transaction.
Zillow explains, “Contingent in real estate, also known as a contingent offer, means the seller has accepted the offer, but certain conditions must be met before closing the deal.” [1] This listing status is a clear signal that the property is under contract, but the journey to closing has a few more steps. If these conditions aren’t fulfilled, the buyer can often walk away without penalty.
Your real estate agent can get more details on a contingent listing. They can find out what the specific contingencies are, which gives you a better idea of how likely the current deal is to proceed. Understanding this status is crucial for navigating home sales effectively.
Why Sellers Use Contingent Status
You might wonder why a seller would accept a contingent offer instead of waiting for one without conditions. Often, contingent deals are the norm, as most buyers need to secure financing or conduct inspections. Accepting a current offer with a contingency clause is a way to move the sales process forward.
Sellers and their real estate agents know that these protective clauses are a standard part of most transactions. A contingent offer from a qualified buyer is a strong step toward a successful sale. It shows serious interest and commits the buyer to the property, provided their conditions are met.
In some situations, a seller might even continue to show the property while it’s contingent. This is a strategy to line up backup offers in case the first one doesn’t work out. It provides the seller with a safety net and keeps their options open until the contingent deals are finalized.
Common Types of Contingencies in Home Sales
A contingent offer is built around one or more specific conditions. These common contingencies act as safety nets for the buyer, allowing them to back out of a deal if something goes wrong. Understanding these can help you better navigate the real estate market.
From ensuring the property is in good shape with a home inspection to making sure the purchase is financially possible, these clauses are vital. Let’s look at some of the most frequent contingencies you’ll encounter, like the home sale contingency and others.
Financing Contingency Explained
One of the most common clauses is the financing contingency, sometimes called a mortgage contingency. This clause makes the buyer’s offer conditional on their ability to secure a loan from a mortgage lender. It protects you from being legally bound to purchase a home you cannot get funding for.
The clause typically provides a specific timeframe for you to obtain final mortgage approval. If you are unable to get a loan within that period, you can withdraw your offer and, in most cases, get your earnest money deposit back. This is a crucial protection for buyers in any real estate market.
Without this contingency, you could be at risk of losing your deposit or even facing legal action from the seller if your financing falls through. It ensures that your ability to complete the purchase is confirmed before the deal becomes legally binding.
Inspection Contingency Essentials
An inspection contingency is another essential safeguard for buyers. This clause gives you the right to have a professional home inspection conducted on the property within a specified timeframe. It’s a key part of your due diligence as a homebuyer.
During the inspection period, a qualified inspector will assess the home’s condition, looking for any potential issues with its structure, systems, and components. If the home inspection reveals significant problems you weren’t aware of, this contingency gives you several options to move forward in the sales process.
Depending on the findings, you can ask the seller to make repairs, request a price reduction to cover the cost of future repairs, or, if the issues are too severe, you can choose to walk away from the deal entirely. This clause ensures you don’t unknowingly buy a property with costly hidden defects.
Appraisal Contingency Details
The appraisal contingency is designed to protect both the buyer and the mortgage lender. When you apply for a mortgage, the lender will order a home appraisal to determine the property’s fair market value. This ensures they are not lending more money than the home is actually worth.
This contingency states that the home must appraise for a value equal to or greater than the agreed-upon purchase price. If the home appraisal comes in low, this clause gives you the power to renegotiate the price with the seller.
If the seller is unwilling to lower the price to the appraised value, the appraisal contingency allows you to back out of the contract without penalty. This prevents you from having to pay more for a home than its value or being unable to secure the loan because of the appraisal gap.
Home Sale Contingency Overview
For buyers who already own a property, the home sale contingency is incredibly important. This clause makes your offer to buy a new house conditional on the successful sale of your buyer’s current home. It helps you avoid the financial strain of owning two properties at once.
The home sale contingency usually includes a specific deadline by which your current home must be sold. If you are unable to sell your property by that date, the current deal on the new home is terminated, and you can typically reclaim your earnest money deposit.
While this contingency is great for buyers, it can make an offer less attractive to sellers because it adds uncertainty and a longer timeline to the home purchase. A seller might prefer an offer without this condition, but it remains a common and necessary tool for many buyers.
How the Contingent Status Impacts Buyers
When you encounter contingent homes during your search, it doesn’t mean you should immediately move on. For potential buyers, this status can signal an opportunity, not a dead end. While the seller has accepted an offer, the deal is still fragile.
A knowledgeable real estate agent can be your best resource in these situations. They can investigate the details of the existing offer and help you decide if submitting a backup offer is a smart move. Understanding how to approach these listings can give you an edge.
What Buyers Should Expect With Contingent Homes
When dealing with contingent homes, it’s important to set realistic expectations. The original purchase agreement is already in place, which means another buyer is ahead of you. However, according to data from the National Association of Realtors (NAR), a small percentage of deals do fall through, so there is always a chance. [2]
Your first step should be to talk to your agent. They can check the multiple listing service (MLS) for details on the type of contingency. For example, a home sale contingency might be more likely to fail than a simple inspection contingency. This information helps you gauge your chances.
If you decide to proceed, you’ll likely be submitting a backup offer. This means your offer is in line to be accepted if the primary one collapses. You won’t be actively negotiating unless the first deal is officially terminated, so patience is key.
Risks and Opportunities for Buyers
Placing a buyer’s offer on a contingent home comes with a mix of risks and opportunities. The primary risk is emotional—you might get your hopes up for a house that you ultimately can’t buy. There’s also the chance you miss out on other available homes while waiting for the contingent deal to play out.
However, the opportunity is significant. If the initial deal fails due to financing issues or failed contingency removals, your backup offer could put you in the perfect position to purchase the home without facing a competitive bidding war. In a hot real estate market, this can be a huge advantage.
Here are a few things to consider:
- The wait: You may be in limbo until the first offer is resolved.
- Earnest money deposit: Your agent can clarify when and if an earnest money deposit would be required for a backup offer.
- Strength of your offer: A strong offer with few contingencies can make your backup position more appealing to the seller.
Steps to Take If Interested in a Contingent Home
Yes, you can absolutely buy a house that is listed as contingent, but you need a solid strategy. The key is to be prepared to act as soon as the opportunity arises. Your first move should always be to discuss the situation with your real estate agent.
They can contact the seller’s agent to express your interest and find out if they are accepting backup offers. If they are, you’ll want to have your finances in order, including a pre-approval letter for a mortgage, to show you are a serious and capable buyer.
If you’re ready to make a move, here’s what to do:
- Submit a backup offer: Work with your agent to draft a competitive backup offer.
- Stay ready: Have all your final paperwork prepared so you can move quickly.
- Continue your search: Don’t put your entire home search on hold while waiting.
- Plan the home inspection: Be prepared to schedule a home inspection quickly if your offer becomes the primary one.
Contingent vs. Pending: What’s the Difference?
While they sound similar, contingent and pending represent two distinct stages in a real estate transaction. Contingent listings still have conditions that must be cleared, making the accepted offer somewhat uncertain. The current contract depends on these conditions being met.
A pending status, on the other hand, means all contingencies have been satisfied, and the sale is on a clear path to closing. At this point, the deal is much more secure. Understanding this difference is crucial for managing your expectations as a buyer.
Key Characteristics of Pending Listings
A pending listing signals that the major hurdles in the sales process have been cleared. An accepted offer has moved past the contingency phase, and all parties are now working on the final steps to close the deal. The property is effectively off the market, and the seller is no longer actively seeking new offers.
While a pending sale is very likely to close, it’s not a 100% guarantee. Unforeseen issues, like a last-minute problem with the title or a buyer’s financing falling through, can still derail the transaction, although this is rare. According to HomeLight, it’s estimated that about 5% of pending offers fall through. [3]
Here’s a simple breakdown of the main differences:
| Feature | Contingent Status | Pending Status |
|---|---|---|
| Conditions | Offer is accepted, but conditions (contingencies) must be met. | All contingencies have been met or waived. |
| Market Status | May still be shown and accept backup offers. | Generally not shown and not accepting backup offers. |
| Certainty | The sale is uncertain and could fall through. | The sale is very likely to close. |
| Buyer Action | Good opportunity to submit a backup offer. | Very low chance for a new buyer to make an offer. |
How and Why Homes Move From Contingent to Pending
A home’s status officially changes from contingent to pending once all the conditions of the sale have been successfully met. This transition marks a significant milestone in the transaction, signaling that the deal is moving into its final stages.
For example, once the buyer secures their mortgage, the inspection is completed without major issues, and the appraisal comes in at or above the sale price, all outstanding contingencies are removed. At this point, the contingent deal becomes a solid pending offer. The buyer and seller are now committed to completing the sale.
As Zillow defines it, a pending offer means the seller has accepted an offer with no outstanding contingencies. [1] The listing is no longer active, and the property remains in pending status until all legal work is processed and the deal officially closes. This shift provides much greater certainty for everyone involved.
Making an Offer on a Contingent Listing
Seeing a contingent offer on a home you love doesn’t mean you’re out of the running. You can still submit a buyer’s offer, which would be considered a backup. If your proposal is strong, it might be seen as a better offer than the one they currently have.
If the current deal falls through for any reason, the seller will be eager to move on to the next viable option. Having a compelling backup offer ready can place you at the front of the line, turning a disappointing situation into a successful purchase.
Can Buyers Submit Offers on Contingent Homes?
Yes, buyers can, and often should, submit offers on contingent homes. This is done by making a backup offer, which essentially puts you in line to buy the property if the current deal collapses. It’s a common strategy, especially in competitive markets.
Your real estate agent plays a vital role in this process. They can communicate with the seller’s agent to confirm that backup offers are being accepted. Some sellers are very open to this, as it gives them a safety net and peace of mind.
If the first buyer is unable to meet their contingencies and has to back out, the seller can then move directly to your backup offer without having to put the house back on the market. This can save the seller time and make your offer for the home purchase very attractive.
Strategies For Competing With Contingent Offers
If you want to compete with a contingent offer, your goal is to present a better offer that is more attractive to the seller. You want the seller to hope the first deal falls through so they can work with you instead. A strong financial position is your greatest asset.
One effective strategy is to offer a larger earnest money deposit. This demonstrates your seriousness and commitment to the purchase. Another approach is to have as few contingencies as possible in your own offer. For instance, if you don’t need a home sale contingency, your offer becomes much stronger.
To make your backup offer stand out, consider these tips:
- Offer a competitive price: A slightly higher price can catch the seller’s attention.
- Be flexible on closing: Accommodate the seller’s preferred timeline to make the sales process easier for them.
- Get pre-approved: A full mortgage pre-approval is more powerful than a pre-qualification.
- Write a personal letter: Explaining why you love the home can create a personal connection with the seller.
Timeline and Outcomes of Contingent Listings
The amount of time contingent listings remain in that status can vary widely. There is no single, set timeline. The duration depends almost entirely on the specific contract terms agreed upon by the buyer and seller.
Each contingency in the current deal has its own deadline. For example, an inspection contingency might last 7-10 days, while a financing contingency could be 30 days or more. These timelines dictate how long the house stays contingent before either moving to pending or coming back on the market.
Average Time a Home Remains Contingent
The average amount of time a home stays in contingent status typically ranges from a few days to several weeks. The exact duration is determined by the contingency clause with the longest timeline in the current offer.
For example, if the only contingency is a home inspection, the status might only last for a week or two. However, if the buyer needs to secure financing or sell their own home, the contingent period could stretch to 30, 60, or even 90 days. The complexity of the conditions directly impacts the timeline.
Ultimately, the sales process is unique for every transaction. The speed at which a home moves from contingent to pending depends on how quickly the buyer can satisfy the agreed-upon terms. A motivated buyer with a straightforward situation will resolve contingencies much faster than one with more complicated requirements.
Conclusion
Understanding the contingent status of a house is essential for buyers navigating the real estate market. It provides insight into the various conditions that can affect a potential purchase, from financing to inspections. By being well-informed about what contingent means, the different types of contingencies, and how they influence buying opportunities, you can make more strategic decisions when considering homes. Remember, while a contingent status may seem daunting, it can also open doors to unique opportunities if you’re prepared to act. If you have any questions or need personalized advice on making offers for contingent listings, feel free to reach out for a consultation. Happy house hunting!
Frequently Asked Questions
Is it risky to make an offer on a contingent house?
Making a buyer’s offer on a contingent house is a low-risk move. While there’s a chance the current deal will close, your backup offer only becomes active if the first one fails—often due to a failed home inspection or financing issue. You can usually continue your home search while waiting.
What happens if a contingency isn’t met during a sale?
If a contingency clause in the purchase agreement isn’t met, the current deal can be legally terminated. For example, if a home sale contingency fails, the buyer can walk away, typically with their earnest money deposit. The seller can then accept a backup offer or relist the property.
Are all contingent home sales likely to fail?
No, most home sales with an accepted offer do proceed to closing. Data suggests that only a small fraction of contingent home deals fall through. [3] A real estate agent can offer insight, but the successful completion of contingency removals is a very common part of the homebuying process.
Citations:
[1] Zillow. “Contingent vs. Pending: What Do They Mean?” Zillow.com, Accessed November 2023. [2] National Association of Realtors. “Realtors® Confidence Index.” NAR.realtor, Accessed November 2023. [3] HomeLight. “How Often Do Pending Sales Fall Through?” HomeLight.com, Accessed November 2023.