What Does Contingent Mean in Real Estate?

Homebuyers frequently see homes listed for sale marked as contingent or under contract. Here, I can help you better understand what this means when a house is contingent including the different types of contingencies. Most importantly, I’ll help you understand whether or not you should continue to pursue or make an offer on a contingent house.

What Is a Contingent House?

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. The contingent part means the homebuyer can cancel the purchase if the contingent event does not occur.

Essentially, a homebuyer has said to the seller, “I will buy your property but only if [insert event] happens.” Due to the fact there is no certainty the event or desired information will be received the offer is contingent meaning it can be terminated.

How Does a Contingent Offer Work?

A contingent offer on a house typically works by reserving the right to purchase the home for a homebuyer so long as a specific event occurs. For example, Homebuyer Heather makes an offer to purchase Seller Sally’s house at 123 Banana St. But, Homebuyer Heather may have made her offer contingent on having an inspection to ensure the property is free of any major defects.

In this example, Heather has the contractual first right to purchase the home, and this right can not be taken away from her while she is completing inspections to make sure the property is free of meaningful defects. Once her inspections are complete and the property is found to not have any major defects Heather can waive the contingency. At this time the transaction will move forward towards closing.

Different Types of Contingencies

Remember, a contingency on a house means the completion of some other event must occur. Buying a house is a major purchase. So, many buyers put a lot of “ifs” or “so long as…” in their offers. Here are the common contingencies and the condition or event which must be satisfied before the home sale will close.

Contingent on Inspection (Cont. – SI)

A contingent on inspection contingency means the buyer will purchase the home so long as inspection of the property does not reveal any serious defects. Buyers often hire a home inspector to inspect the property to see if the seller failed to disclose any defects. The contingency is removed once the inspection is completed and either no defects are revealed or the seller agrees to repair items requested by the buyer.

Contingent on the Close of Sale (Cont. CS)

This home sale contingency is a little different. This means the person buying the property with the contingency must sell a home, and the home they must sell does not yet have an accepted offer on it. I’ll break this down a little more.

Call the property you see marked as contingent Property #1. The person trying to buy Property #1 owns a home which she must sell in order to buy Property #1. We will call the home the buyer must sell Property #2. The buyer has not yet accepted an offer on her property, Property #2.

Contingent on the Close of Contract (Cont. CC)

Next is contingent on the close of a pending contract. This is very similar to contingent on the close of sale I described above. So much so I want to use what I wrote there, here.

The difference between the contingent on the close of sale and the close of a pending contract is the buyer of Property #1 (the property you see online) has accepted an offer on Property #2 (the property the buyer must sell in order to buy Property #2).

Contingent, Please Show (Cont. – PS)

Contingent, please show is the catch all drawer for a transaction with a contingency. This is the contingency real estate agents use when the condition or event which must be completed does not fit neatly into the other available contingencies. Something unique is happening in the transaction.

Can You Make an Offer on a Contingent House?

Can you buy a contingent house depends on the contingency in place. This is due to the fact not all contingencies are created equal. Regardless, it may not be the best use of your time and emotional energy.

Some contingencies allow other homebuyers to intercept the contingent house while others do not. For example, it is very unlikely you would be able to steal away a house that is contingent on the completion of an inspection or financing approval. On the other hand, a contingent house due to the buyer needing to sell a home can leave the door open for the opportunity for a new buyer like you to interfere and get the house. You need to know the contingent house meaning or what is the contingency.

A local real estate agent is the best source to determine whether or not making an offer on a specific contingent house is worth doing or not. Different geographic regions have different schemas for labeling the types of contingencies. A local real estate agent in your area will be able to quickly decode what type of contingency is in place.

Additionally, your Realtor® can contact the listing agent to learn more about the transaction. Your agent should report back to you with information and advice about whether or not making an offer on a contingent house is a good idea or not for that particular home.

Pros of Making an Offer

• Gives you a chance to buy the home you want.
• Let’s the Seller know you are interested in the property.
• Seller can accept the offer as a back-up.

Cons of Making an Offer

• Can cause false hope to get the home especially if it is unlikely the current transaction will fall through.
• If accepted as a back-up it can cause you to ignore other great homes which come on the market due to sticking with the contingent house.
• Due to the fact you are second-chair to the first offer, you have no control over the timelines when the property will close. Therefore, you could be waiting a while to see the outcome of the first offer.
• Can be emotionally exhausting with lots of feelings of uncertainty and anxiety.

How Long Does a House Stay in Contingent Status?

A house can be in contingent status for several days to several months. The amount of time a house remains in contingent status depends on two things: local multiple listing service (MLS) rules and the type of the contingency.

Throughout the U.S. there are many multiple listing services (MLS) managed by associations and cooperatives. Due to this, each MLS has its own way of doing things including dictating at what stage of a transaction a home’s status is changed from active to contingent to pending to sold. This will cause variation from area to area about how long a home will stay in contingent status.

Secondly, the type of contingency affects the timeline, too. An inspection contingency can usually be resolved within 7 to 14 days after the offer was accepted. A financing contingency can take 35 to 45 days to be resolved.

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.

In conclusion, how long does a house stay in contingent status for no time at all or as long as several months. The time can be affected by local MLS advertising rules, too. Typically, though, a house is often in contingent status for about 20 to 30 days before switching to pending.

What’s the Difference Between Contingent and Pending?

Typically, a house for sale with pending status is an indication all or nearly all of the contingencies have been resolved. But, please note that I described this as typically. Real estate agent associations and their MLSs dictate when a home can be placed in contingent or pending status. Therefore, there is a variation from area to area.

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. To best understand the differences between real estate pending vs contingent you should contact a local real estate agent. What pending means in real estate in Valparaiso, Indiana may not mean the same thing in Valparaiso, Florida or Valparaiso, Nebraska.

Most often, it is much less likely you can interfere or intercept the home when writing an offer on a pending house compared to a contingent house.

Conclusion

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.

There are different types of contingencies. Common contingencies include the opportunity for the buyer to inspect the property, for the buyer to have financing approved, for the home to appraise for value and the more complicated contingency of giving the buyer an opportunity to sell an existing home.

Homebuyers can make an offer on a contingent house. However, it might not be the best decision. 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.

The Quadwalls Team of Realtors® in Northwest Indiana

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