When it comes to real estate, you may be wondering what contingent means. Perhaps you were looking at home on Realtor or Zillow and saw the word contingent there.
The truth is the word contingent has a simple definition. And that is this: when something is contingent, it is dependent upon something else happening.
Now, of course, there is also the noun contingent, which means a group of people. But for our sake, we’re talking about the adjective contingent as it relates to real estate transactions.
However, in real estate there are a number of situations where the word contingent or contingency comes into play. In this article I hope to explain all of those different scenarios to you. That way if you find yourself buying or selling a home and facing a contingency, you know exactly what it means.
What does contingent on a house mean
Let’s say you see a real estate listing for a house, apartment, condo or another piece of property and it says “contingent.” That means that the seller has accepted an offer from a buyer.
You may also see a home that says active contingent. It’s basically the same thing. The seller has accepted an offer but the home is remaining active for the time being.
A contingent home in real estate may still be shown. That’s because the sellers or their real estate agent realize that there are many scenarios where a contingency might fall through.
How often do contingent offers fall through
For example, a contingent offer might fall through if the buyer making the offer hasn’t been pre-approved for a mortgage. Then, they can’t get financing and so the deal is off.
Or, on the flip side, a contingent offer might fall through when the buyers get to the inspection phase. In certain instances a buyer may not like what the inspection report finds. Therefore, they have the ability to back out of the sales agreement. Now you’ve got a contingent offer falling through for a completely different reason.
However, a home going contingent is just the first step in buying a home or a home coming off the market because it is sold. In fact, the next question to ask is what is the difference between contingent vs pending.
The meaning of contingent vs pending
As I’ve explained, a home that is marked contingent in a real estate listing means the sellers have accepted an offer. You may see home marked Contingent, Continue to Show.
Usually this happens in a hot real estate market when sellers want to encourage backup offers. However, this doesn’t always work to the sellers’ benefit as few backup offers ever go through. But it does happen.
Now, a home moves from contingent to pending when the sale moves to the next stage. That is, whatever contingencies were out there have all been met. This could be financing, inspections or other situations. I’ll explain all of that in the next section of this article.
Anyway, once a house is pending, it’s pretty much off the market. Realtors will not continue to show it and unless something catastrophic happens, the sale is going through.
How long does a contingent phase last
A home can stay contingent for varying lengths of time. There is no set rule about how long a contingency lasts. However, in my experience they can be as short as 14 days or as long as 60 days.
It’s the same thing with a home being pending. That status remains until the sale has closed. One home we purchased, we were able to close 30 days after making an offer. So that home quickly went from contingent to pending to sold.
Another home we sold, the buyers weren’t in a position to move for a few months. So that home moved from contingent to pending fairly quickly. However, it was listed as pending for months until we eventually closed.
Meaning of other real estate contingencies
As I mentioned there are many other uses of the word contingent in a real estate transaction. These go beyond a seller accepting an offer. Here are some other contingencies you may find yourself dealing with when selling or buying a home.
When someone makes an offer on a house and hasn’t been approved for financing, they may ask for a mortgage contingency. This means that their offer is contingent upon their being able to get a mortgage.
If a seller is desperate to get out of their home, they might accept an offer with a mortgage contingency, especially if no other offers are forthcoming. However, in a hot real estate market, such as the one we lived through in 2020 and 2021, I would be shocked to learn of sellers accepting offers with a mortgage contingency.
Credit Karma can help you find mortgage options.
What does an appraisal contingency mean? That a home must appraise for a certain amount. Usually, the buyer already has financing or a mortgage lined up. However, the mortgage company wants to make sure that the home is worth the amount they will be financing for the mortgage.
So what happens if an appraisal contingency fails? Well, the deal isn’t off, per se. Rather, the buyer usually has to put more money down to make up the difference between what the home appraised for and what they originally offered. Therefore, the mortgage amount doesn’t change and the deal can go through.
Home sale contingency
When we were selling our first home, we found a house we wanted to buy. However, because we didn’t have enough to cover the purchase price of a new house, we made an offer with a home sale contingency. That meant that our offer was contingent upon our original home selling. Then, we would be able to close on the new house.
In this instance the sellers of the home we wanted agreed to a three month-long home sale contingency. Therefore, if our house didn’t sell within three months, the sellers could cancel our deal and put their house back on the market.
Unfortunately, for us, this is exactly what happened. We never found a buyer within that time period. Therefore, we lost out on buying that house.
As I mentioned earlier, an inspection contingency usually means that an offer is contingent upon a successful inspection of a house. Conversely, when people really want a house in a competitive real estate market, they’ll waive inspections. Therefore, there will not be any inspection contingency.
Anyway, in all of the homes we’ve purchased, having an inspection contingency in an offer always turned out to be helpful for us. Because one of two things could happen in our favor. One, if we didn’t like what the inspection found, such as the house with black mold, we could back out of the deal and get our money back. Or, two, we could ask for concessions from the seller.
For example, when we bought our house in Maine, the inspector discovered that the upstairs bedrooms had no heat. Literally no heat. The sellers had re-plumbed the home when they transitioned from oil heat to propane heat.
However, they never connected the new plumbing to the upstairs. So all of the big cast iron radiators in the bedrooms were just decorative.
Once we learned this we asked the sellers for a credit to cover the installation of heat pumps upstairs. They agreed, and then the deal moved from contingent to pending. By the way, we used Home Advisor to find installers for those heat pumps.
Answering the question what contingent means
I hope that this article has answered your questions on exactly what contingent means in a real estate translation. If I’ve missed explaining something, please let me know.
Finally, here are some other articles that deal with real estate language, terms and phrases.