What Does "Contingent" Mean In Real Estate?

Contingent or contingency means a condition is written into the contract that must be met for the contract to be legally binding and upon what the deal depends. Most residential purchase offers include contingencies for property inspections, and appraisal and loan approval. Most sources say, less than five percent of contingent offers fall through.

Common Contingencies in Real Estate

As a homebuyer or a real estate agent, you will find that there are several different types of contingent statuses.

Home Inspection Contingency

The home inspection contingency is typically the first contingency on the timeline, and it may include an inspection of the whole property as well as specific tests for wood infestation, radon, well, septic and other issues ultimately affecting buyers’ willingness to move forward or the sellers’ financial ability to address concerns.

Appraisal Contingency

An appraisal contingency protects buyers if the appraised value is less than the price they’ve agreed to pay for the property. Without an appraisal contingency, the buyers’ deposit would be at risk if they backed out of the contract because the property didn’t appraise for the purchase price.

Mortgage Contingency

If the sales contract has a mortgage contingency clause, the buyer who can’t get a mortgage because the property is classified C5 (significant deferred maintenance) or C6 (severe deferred maintenance) will get their earnest deposit back and the deal is canceled. However, the thwarted buyer will not be reimbursed for the cost of the inspection or the appraisal, which might total about $700.

Title Contingency

In case there is a question of ownership, a title contingency may be added to protect the buyer from a preexisting lien against the property.  A title search before closing can help clear up any questions about ownership. Title insurance is also available to further protect buyers from owner disputes after closing.

Home Sale Contingency

Sometimes a buyer chooses a home for purchase before selling their current home. A home sale contingency states that once their current home is sold, they will purchase the home.

Can You Still Make an Offer on a House that is Contingent?

Yes — if a house is under contract, and should the contract fall through, you could be first in line to make the purchase. If you want a contingent property, it might be a good idea to be the next in line.

Types of Contingent Statuses

Contingent: Show

Contingent show means that there is a contract on the property, but the owner is still willing to show the property and will accept offers as backup offers in the case the offer that is currently on the table falls through.

Contingent: No Show

Contingent no-show means that the seller has a contract on the property that they believe will not fall through, and the seller no longer wants to show the property to other prospective buyers. In simple terms, it means that the property is off of the market.

Contingent: With Kick-Out

Contingent with kick-out is a common phrase to put into a contract. It means that if there is currently an offer on the property, but a better offer comes along, the seller has the option to accept the better offer. In other words, the better offer will “kick out” the current offer. This clause helps the seller get the best deal available.

Contingent: With No Kick-Out

If the contract states “contingent with no kick-out,” it simply means that no other offers are being accepted. If the current contract happens to fall through, the property will show as active and new offers are considered.

Contingent Probate

A contingent probate happens when a homeowner dies, and the estate sale is held to settle the estate.

Short Sale Contingent

In a short sale, the homeowner asks the bank to accept an amount less than the amount the bank is owed on a mortgage. This can happen when the seller, which is usually a mortgage lender or a bank, has said they are willing to take less than what is owed.

Contingent vs. Pending

Contingent or contingency means a condition is written into the contract that must be met for the contract to be legally binding. Most residential purchase offers include contingencies for property inspections, and appraisal and loan approval. Pending status indicates that a buyer’s offer has been accepted and the home is in escrow, meaning that the buyer and seller are both doing what they need to do to ensure that (a) the buyer wants the property and (b) all necessary logistics are in place for the transaction to close. Some might wonder if it is better to be contingent or pending. As the above definitions offer, a contingency or contingent means the contract cannot be complete until the condition or contingency is met. It is usually in the best interest of the buyer. Pending means the process has moved on and the conditions have been met to complete the sale.

How Long is a Contingency On a House?

Depending on the type of contingencies in the offer, the length of contingency varies. The contingent period usually lasts anywhere from 30 to 60 days. A home usually stays in contingent status until the contingencies are met or for the specified period. Contingencies exist in almost every real estate contract to protect the buyer and the seller. If the contingencies are not met, there might be a breach in the contract, and the transaction could fail to close. Be sure to learn about contingencies if this is a condition of your home contract.