Contingent: What It Means in Real Estate
Sometimes real estate terms can be confusing and intimidating, but this article is here to help you understand how everything works.
What Does Contingent Mean in Real Estate?
So, what does contingent mean in real estate? When it comes to real estate, "contingent" means that a buyer has made an offer on a home, and the house's purchase depends on certain conditions being met. These conditions may be selling the buyer's current home or getting the home inspected. Don't worry: contingencies are put in place to protect the buyer and the seller. The contingency period typically lasts 30 days, but it varies by state.
If you're buying a house, your agent will help you navigate all of this—especially if there are any contingencies on your end that need to be met before moving forward with a transaction.
What Is the Difference Between Pending and Contingent?
If a listing is pending, all parties have agreed to the sale and that all sale contingencies have been met. Pending means that everything is good to go, and the deal is almost finished.
Contingent means that some things are still left to do before the sale can be considered final. It's not as simple as just agreeing with the seller—the house needs to be appraised or inspected, or whatever else needs to happen before all parties are satisfied with the deal.
So if you see a home listed as contingent, it doesn't mean that you can't buy it! It means there are still some details left to work out before the sale is final.
Can You Make an Offer on a Contingent Home?
Yes. You can make an offer on a contingent home, but a contingent house has an active, pending request. When you create an offer on a contingent home, you are offering to buy the home if the first buyer's offer falls through.
If the original buyers do not back out of their deal, your offer will be discarded, and the original buyer will move forward with purchasing the house.
However, if the original buyers back out of their deal, your offer is next in line to take over the property. You will have to finalize your proposal and prepare to close as quickly as possible.
When making an offer on a contingent home, it is important to know what you are getting into. Even if the original buyers back out of their agreement, there could still be other offers on the table for the seller to consider.
This means you may still have some competition when buying a contingent home. Also, make sure your offer is strong enough to beat out other offers that may come in a while, waiting for the seller's response to your bid.
Is it Worth Looking at a House That Is Contingent?
The short answer is "yes." But the long answer is: it depends. It depends on how much you love the house and how much you're willing to wait for it.
If you love the house enough to put in an offer but immediately get outbid by another buyer, it might be worth taking a second look. But if you have other homes in mind, or if this particular house isn't right for your family, then maybe not.
It will depend on how picky you are about the property available to you in some situations. Are there other houses that would work just as well? Are you willing to wait a few days to see if this contingent house will go through? Maybe the answer is no.
On the flip side, there are some real advantages to contingent houses worth considering. If you love the place enough, and it fits all your needs (and some of your wants), then waiting a few days may be worth it.
Contingent houses tend to stay on the market longer than non-contingent houses do—which means they're more likely to sell for less than the asking price (which ultimately means more money in your pocket).
Do Contingent Homes Fall Through?
A home sale can fall through at any stage of the process. If a buyer has found another home that they like better or don't want to move to, they can back out of the sale at any point. The same is true if a seller finds another buyer who offers them more money for their home.
However, in both cases, the risk that the deal will fall through is much higher when a home isn't contingent on anything. For example, if you sell your home without contingency and the buyers decide not to buy it, you'll be responsible for finding a new buyer and losing money on the deal.
When you make your sale contingent on finding another home to buy, on the other hand, there's less risk involved for both parties. While this doesn't guarantee that your deal will go through (if you find another place to live but can't find a buyer for yours), it does lessen the chance of loss on either side.
How Long Does a Contingent Phase Last?
Contingency is a temporary status for a property. The buyer makes an offer, but it's contingent on certain conditions. This means that the deal isn't done yet—it's dependent on something else happening first.
The contingency period can last for up to three months for most residential real estate deals in the United States. However, this does not mean that you should expect a purchase agreement to be under contract for that long. This is just the maximum amount of time allowed by law.
This gives buyers the chance to do their due diligence, including getting a home appraisal, inspection, and any other necessary inspections before they are ready to close on the home.
Additionally, your agent may submit requests to have certain repairs made as part of your contract with the seller during this time. As long as these repairs are completed within the timeline specified by your state's law, you will still be able to close within three months or perhaps sooner.
Can a Seller Back Out of a Contingent Offer?
In theory, yes. A seller can back out of a contingent offer—but it's not likely to happen. A contingent offer essentially means that one of the conditions of buying the house is for it to pass an inspection or appraisal.
If it doesn't pass those tests, you can back out of the deal, and your earnest money deposit will be returned to you. Because sellers want to make sure they're getting their home sold, they're unlikely to back out if they have a buyer who wants to buy their house—even if the buyer has contingencies attached.
There are some exceptions: If a seller gets a more lucrative offer without contingencies, or if they're in a situation where they need to move quickly, they may decide to back out of the contract.
Contingent offers are typically more attractive to sellers than non-contingent offers because they remove the risk that their buyer will back out of the deal due to poor financing or a poor inspection.
If your offer is contingent upon meeting certain requirements, you or the seller may cancel the contract if those contingencies aren't met.
Can You Bump a Contingent Offer?
It depends. In real estate, a contingent offer has been accepted but is contingent on (or waiting for) something else to happen.
For example, if you have already bought a house but are waiting to close on it before buying another one, your new offer is contingent on your old home being sold. If the seller of the latest property you are buying accepts your offer despite its contingency status, they may not be able to back out of the deal if you can't follow through with your end of the agreement—in this case, selling your old house.
However, some states have laws that protect sellers from accepting a contingent offer. Each state's laws are different, so we recommend reaching out to an expert to fully explain and understand how the rules apply in your state.
If you have any interests in a house in the state of contingency please contact us at Team Linda Simmons to answer any questions you may have.