Contingent Meaning In Real Estate

By PropertyClub Team
Sep 10th 2023
A contingent real estate transaction is a deal that depends on certain conditions being met. This means that if those conditions, also known as contingencies, are met, the deal will proceed and close. If they are not met, the agreement will fall through and the buyer will get their money back. There are many types of contingencies. Some may come from the buyer, while others come from the seller.

hash-markHow Does A Contingent Offer Work?

When you make a contingent offer, some criteria must happen for the deal to go through. These occur before the sale moves forward. Actions are then taken based on the contingencies, and the sale may move forward or shift to a second offer if the criteria are unmet.

For example, a home may sell dependent on a home inspection revealing ten years of life left on an element of the house. If the home inspection shows fewer than that in the item’s life, the offer may fall through. The contingency has been unmet. 

hash-markCommon Contingencies In Real Estate

  1. Home Inspection Contingency
  2. Mortgage Contingency
  3. Appraisal Contingency
  4. Title Contingency
  5. Home Sale Contingency

1. Home Inspection Contingency

A home inspection contingency gives a home inspector the ability to look at the house. They look for flaws and imperfections and present them to the buyer. From that point, the buyer can ask the seller to fix these. They can also choose to back out of the offer.

2. Mortgage Contingency

A mortgage contingency is time-based. The buyer receives a set amount of time to look for financing for the home. It helps to have all of the preapproval out of the way for mortgages and other help. If the time runs out, the seller can take a secondary offer.

3. Appraisal Contingency

An appraisal contingency is most common if you need help from a mortgage to get the home. An appraiser will determine how much the home is worth. If the price is much higher than it should be, the buyer can back out of the deal.

4. Title Contingency

A title contingency deals with the paper that reveals who the home belongs to in reality. Before investing in a home, the buyer should get a title search to see if the house has a clean title. If not, the buyer can walk away.

5. Home Sale Contingency

The home sale contingency states that the offer will only work if the buyer’s home sells first. If the house doesn’t sell in a certain period, the seller can look at secondary offers and dismiss the one they gave to you.

hash-markKick-Out vs. No Kick-Out Contingency

Contingencies are either kick-out or no-kick-outs. There is a difference between these that is crucial to understand when looking at the criteria for your offer.

A contingency with a kick-out means that the seller can continue to look at other offers besides yours. They might consider offers with fewer contingencies attached.

A contingency with no kick-out means the opposite. The buyer cannot look at other offers. They have to work through your criteria and find a way to make them work.

hash-markContingency FAQs

Can you make an offer on a house that is contingent?

You can put up an offer on a house that is contingent. Although there is no guarantee of anything, you will be one of the first in line if the deal happens to fall through for any reason. If you love a space with a contingent offer, you should try.

What is the difference between pending and contingent?

Contingent means an offer has happened, but the sale has not gone through due to contingencies. On the other hand, pending means that the conditions have been met, and the deal is pending. The home will almost certainly close if it's pending. 

Can a seller accept another offer if contingent?

A seller can accept another offer while contingent if operating under a kick-out contingency. They can search through their choices and find an offer with fewer restrictions attached to it. This ability is why it’s critical to be smart about your contingencies.

What is an example of a contingency in real estate?

One example of a contingency in real estate is an appraisal contingency. If you’ve agreed to pay $500,000, but the home is appraised for $350,000, you can walk away from the offer and search elsewhere for a new home.

How do you beat a contingent offer?

You can beat a contingent offer if operating under a kick-out clause by adding few to no contingencies to your offer. Sellers don’t like being boxed in by rules and restrictions. Get rid of contingencies to win if you’re up against a contingent offer.

Can a seller cancel a contingent offer?

If the conditions for the deal are unmet, the seller can back out at any point. They should clarify what they’re doing and make the best choice. A seller can cancel a contingent offer if it seems like the conditions required from the buyer won’t happen.

Why would a house be contingent?

A house can be contingent to protect both the buyer and the seller. It guarantees that the seller receives payment and helps ensure the buyer moves into a proper home. Contingencies can be a pain, but they offer protection in the real estate world for everyone involved.

Is contingent the same as under contract?

Contingent and under contract are the same thing. Contingent means that the buyer has accepted an offer, which means it is under contract right away. If you hear the home is under contract, it could be contingent.

What two items are most purchase agreements contingent on?

Most purchase agreements are contingent on mortgage approval and home inspection. If both are satisfactory, the sale will usually go through.

What are the most common contingencies in real estate?

Some of the most common contingencies in real estate include the home inspection contingency, the mortgage contingency, the title contingency, the appraisal contingency, and the home sale contingency. These ensure money in the pocket of the seller and a safe home for the buyer.