Learn What Contingent Means in Real Estate

When a home is listed as "contingent" on a real estate listing, it means a homeowner has reached an agreement with a buyer for the sale of a property, but the sale is contingent on one or more conditions before the sale is finalized. A homebuyer may make a contingent offer on a home if they are waiting for home inspection or appraisal on the new property, confirmation of financing, or the sale of their current home.

Contingencies allows the homebuyer to withdraw their offer under certain agreed-upon conditions without any financial repercussions like losing an earnest money deposit. It is still possible to put an offer on a contingent home—which is often called a “backup offer”—as the buyer and their agent may accept your offer if the buyer's contingencies are not met.

There are several reasons that a home buyer may make a contingent offer on a property. Here is an overview of the most common types of common contingencies.

1. 1. Home appraisal contingency: A home appraisal contingency is when the sale is contingent on a home appraisal confirming the home’s listing price matches its value. Mortgage lenders usually require a home appraisal before granting an applicant the financing for their homes.
2. 2. Home inspection contingency: A home inspection contingency is when the home sale is contingent on a home inspection that does not reveal any major problems with the home, which could be grounds for a renegotiation of the sales price.
3. 3. Mortgage contingency: A mortgage contingency, also known as a financing contingency, is when the home buyer is waiting to find out whether or not they have been approved by a mortgage lender for a home loan.
4. 4. Home sale contingency: A home sale contingency is when a buyer is waiting to sell a property they already own before finalizing the purchase.
5. 5. Title contingency: A title contingency allows the buyer to withdraw their offer if it turns out that the property does not have a clear title. This means that there are third-party claims to the house, like liens or unpaid debts from the previous owner. Buyers will view a title report or run a title check in order to satisfy a title contingency.

Contingent and pending sales statuses both come up when a home is “under contract,” which is when an owner has accepted a buyer’s offer and both parties have agreed to the sale. However, they represent different stages in the home purchase process. Here is how the two are different from each other.

• Contingent: With a contingent offer, a homeowner has reached an agreement with a buyer for the sale of a property but the sale is contingent on one or more conditions before the sale is finalized. Contingencies will come up when a home is under contract. A contingent offer means that the sale is moving forward, but outside offers may be accepted.
• Pending: A property listed as “pending” or “sale pending” means that the deal between buyer and seller is very close to being finalized. A pending status sale means that all contingencies have been met and the terms of the real estate contracts between buyer and seller have been satisfied. It is still possible for a pending home sale to fall through, but real estate agents will be less likely to accept an offer on a pending property than they would for a contingent or under contract property.

You can still make an offer on a home that is listed as contingent. Many real estate agents will accept backup offers on contingent properties in case the current sale falls through. Contingent listings can be listed as "continue to show" (CTS) or "no show" properties on the multiple listing services. With "show" listings, the real estate agent is allowed to show the property to other prospective buyers who may make backup offers. "No show" properties cannot be shown to buyers, although buyers may still make offers.

The contingent listing might also be listed as "kick-out" or "no kick-out." A kick-out listing means that the homeowner has the right to terminate the terms of the original offer and accept a new offer. No kick-out means that the seller must wait to see if the original offer comes through before considering another offer. This could increase the odds of the current contract being terminated and your backup offer being accepted. If the home has a kick-out clause, you may even have your offer accepted outright.

If you’re thinking of making an offer on a contingent property, there are a few things you can do to potentially increase your chances of having your offer accepted.

1. 1. Work with a real estate agent. An experienced buyer’s agent can help you mine information about the contingent terms of the home in question. They can communicate with the listing agent and find out the terms of the contingencies, giving you a better idea about how to plan your own offer.
2. 2. Know the contingencies of the current offer. Gather information about the current contingencies so that you can minimize your own to make your offer look more appealing. For example, if the current offer comes with a financing contingency, confirm your own financing first so you can approach the seller with an offer without that contingency.
3. 3. Connect with the home seller. Once you've decided to make an offer—especially on a kick-out contingent home—a personal gesture can go a long way. You may want to write an email or a letter to the home seller. If you can convey to them that their property is your dream home, they may be more willing to consider your offer, rather than draw out the process with the contingent accepted offer.
4. 4. Be patient. Try to be patient when you’re waiting to find out how the current offer pans out. Avoid pestering the listing agent and home seller about the status of the contingent offer, as you may turn them off and spoil your offer's chances.

All investments, including real estate investments, come with inherent risks which may involve the depreciation of assets, financial losses, or legal ramifications. The information presented in this article is for educational, informational, and referential purposes only. Consult a licensed real estate or financial professional before making any legal or financial commitments.

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