Contingent: What It Means In Real Estate
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These contingencies are essentially an escape clause that prevents you from losing the earnest money that you offered to seal the deal. For instance, if a seller offers a certain price and you, as the buyer, say the price is fine (provided the home inspection comes back clean), you have made a contingent real estate contract. In this case, the sale of the house depends on the inspection not having problems defined in the contract. A contingent offer is an offer from a buyer to a seller with conditions that must be met for the offer to be binding. The contingency is the clause that gives the buyer the right to back out and recuperate any money they’ve put down if the clause isn’t met. A contingent offer on a house is an offer with a protective clause on behalf of the buyer.
What’s the difference between contingent and pending?
Understanding the differences between contingent and pending can help you identify properties that you still might be able to buy, and also how to move forward if you’re interested. A title search looks through public records to ensure there aren’t unknown liens on the property or additional owners with rights to the property that can affect the purchase. Keep in mind that sellers don’t like to receive an offer with a long list of contingencies, especially in a competitive housing market.
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A local real estate agent will be the best resource to help you get information about the likelihood of being able to disrupt the current sale with an offer of your own. The same is true for assessing the difference between contingent vs pending real estate in your area. Accepted offers with a buyer who must sell a home usually cause the home to stay in contingent status for the longest amount of time. This is due to the fact the homebuyer is often given an amount of time to get his or her existing home under contract and then roll into the timelines of inspection and financing contingencies. A home purchase with these contingencies can easily leave the home in contingent status for 45 to 90 days. Contingent real estate means the seller has accepted a buyer’s offer, but the offer is contingent on the completion of some other event or receiving additional information before closing.
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Unlike a CCS status, a no-show status means that once a seller has accepted an offer with contingencies, they’ll no longer show the house or accept offers. Once the buyer addresses all contingencies, the status will be moved to pending and the closing process can begin. A contingent house occurs once the homeowner has accepted an offer from a buyer, but the close of the sale is tentative on the completion of some other event or receiving some other information. The contingency works to protect the buyer’s contractual first right to purchase the home. For example, in the MLS where I typically work a home seller may have the home’s status changed to pending immediately after accepting an offer even if the offer has contingencies.
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What Is A Pocket Listing?
“Contingent is a legal framework in real estate contracts,” says Christa Kenin, a Douglas Elliman real estate agent. Another common and important contingency for buyers is a title contingency. It also lets the buyer get their earnest money back if they learn the association isn’t financially stable. Further, buyers sometimes unknowingly do things that jeopardize their mortgage approval (like taking out another loan before closing). They can also run into bad luck, such as getting laid off while under contract, which ruins their approval.
What are the most common contingencies?
“I would also recommend clearly communicating a timeline for when things need to be completed and when they are completed,” she says. Rocket Homes Real Estate LLC is committed to ensuring digital accessibility for individuals with disabilities. We are continuously working to improve the accessibility of our web experience for everyone, and we welcome feedback and accommodation requests.
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Prequalification may help get your offer to the top of the stack when sellers start sorting through backup offers and alternate buyers. It might last for a few days to a few weeks or even longer, depending on how quickly the buyer and seller can fulfill the conditions outlined in the contract. With this status, your listing is no longer active, so your days on market will stop accruing. However, you can still accept backup offers from prospective buyers. It’s also true that most real estate contracts, even those with contingencies, end up closing.
Appraisal contingency
Contingent means the seller has accepted an offer, but there are still conditions that need to be met for the sale to close. Usually, this is because the buyer has included contingencies in the contract, like inspection or financing contingencies (more on these in a minute). The seller may decide to accept backup offers on the home until all contingencies are satisfied. A property listed as “contingent” in real estate means the seller has accepted an offer, but the deal isn’t fully closed yet.
The sale should close, and your best bet is to find another property to purchase. If this home is particularly desirable to you, however, it doesn’t hurt to contact the seller’s agent and let them know you’re interested—just in case the deal falls through at the last minute. The listing may even say “pending – taking backups” if this possibility exists. However, the contingency clauses in the purchase contract let the buyer get out of the deal for specific reasons without losing their earnest money.
If the contingent status has a kick-out clause, it means there’s a deadline to fulfill all contingencies. In other words, the seller can take their time meeting all the contingencies listed in the buyer’s offer. Contingencies are likewise available for a home buyer to include with their offer to purchase. For example, an inspection contingency calls for an inspector to evaluate the home’s condition. If the home inspection reveals plumbing, structural or other severe issues with the house, the buyer has an opportunity to negotiate repair costs or back out of the home sale.
As you navigate them, it’s important to understand how they work for the best outcomes. If that happens, sellers are happy to fall back to one of these other offers, entertaining another prospective buyer without downtime. Tell us a little bit about your plans (where you’re looking to buy and when you want to make a purchase) and we’ll connect you with top-rated buyer’s agents in your area. If the buyer already owns a home, they might plan to use the proceeds from selling that property to pay for their new one.
A disclosure contingency allows the buyer to back out if the disclosures are problematic. Contingent is a term that applies to a home that is under contract, but finalizing the sale is subject to certain criteria outlined in the agreement. There are several different types of contingency statuses where another buyer can still make an offer on the property.
This can be due to snagged negotiations, delayed construction, longer-than-usual processing time, or simply agent oversight in updating the listing status. If a contract has been signed, the seller may still be able to accept a second offer if any contingencies aren’t fulfilled – which voids the contract. For example, if a buyer doesn’t complete all contingencies within 30 days, some contracts may void the deal at that point. If a title search comes back with unpaid property taxes or ownership questions, the buyer can leave the agreement. A title contingency is required by most lenders, and even cash buyers are advised to include this clause in their contract. Home inspection contingencies protect home buyers by requiring that the home pass professional inspection before the contract can settle.
Keep in mind, you’ll need to submit an offer more attractive than other bids the seller could potentially receive. This means that if you plan on making a contingent offer, the seller could decide to go with someone who submitted a non-contingent or cash offer. To show the seller you’re a serious home buyer, it’s also wise to get preapproved for your mortgage. If you’re interested in a property that’s listed with an active contingent status, you may still be able to make an offer. In a strong seller’s market, where available homes are scarce, it can be difficult for buyers to get sellers to agree to contingencies. For example, if other buyers will agree to cover the cost of any problems uncovered by the home inspection, the seller has little incentive to agree to an offer that’s attached to an inspection contingency.
If the home appraises for less than expected, the lender may demand a higher down payment or refuse to make the loan. An appraisal contingency lets the buyer back out of the purchase if the home appraises too low for their lender to move forward with the loan as expected. Amy Fontinelle is a freelance writer, researcher and editor who brings a journalistic approach to personal finance content. Since 2004, she has worked with lenders, real estate agents, consultants, financial advisors, family offices, wealth managers, insurance companies, payment companies and leading personal finance websites. Amy also has extensive experience editing academic papers and articles by professional economists, including eight years as the production manager of an economics journal. If the property doesn’t have a clear title and the title defect can’t be fixed easily, this contingency gets the buyer off the hook.
And a deal with no kick-out clause may take particularly long, because there is no deadline set for the buyer to meet all necessary criteria. Here are a few different types of contingent listings that you might see on the market. Sellers also need somewhere to live after they leave their current house. Sellers who haven’t found their next home yet can accept an offer, but add a contingency that allows them to back out of the sale if they aren’t able to find a new place to live by a certain date. When a home is under contract but the sale hasn’t closed, the listing or yard sign may indicate the stage of the sale process.
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