What Does Contingent Mean?

When you’re shopping for a home, you might not be able to tell your chances of buying the home from the listing. That’s because properties have different listing statuses that are on a spectrum from “active” (available for sale) to “sold” (no longer for sale). What’s more, certain statuses might have different names depending on your location, and listing statuses aren’t always accurate or up to date.

What Does “Contingent” Mean in Real Estate?

If you see a home for sale and the listing says “contingent” or “contingent sale,” it means that the seller has signed a real estate contract with a buyer. However, the buyer may exit the deal without losing their earnest money deposit under certain circumstances, or contingencies, specified in the contract.

How Does Including a Contingency Protect Buyers?

Contingencies in a home purchase contract give buyers (and sometimes sellers) opportunities to exit the deal without penalty if a major problem arises before closing. But why would a seller be willing to accept such an offer?

It’s common practice for buyers to place an earnest money deposit in an escrow account when signing a purchase contract with the seller.

This deposit shows the seller that the buyer is serious enough about closing the deal that they’re willing to compensate the seller for taking the home off the market if the deal falls through—for example, if the buyer finds another home they like better. However, the contingency clauses in the purchase contract let the buyer get out of the deal for specific reasons without losing their earnest money.

8 Common Real Estate Contingencies

These are the contingencies buyers often include in purchase agreements.

1. Disclosure Contingency

Under state law, sellers may be required to disclose certain things about their homes before or after going under contract with a buyer. For example, the seller would need to inform the buyer in writing about any known problems with the foundation, roof or plumbing. A disclosure contingency allows the buyer to back out if the disclosures are problematic.

2. Home Inspection Contingency

As a buyer, putting a home inspection contingency in any purchase agreement is a good idea. This contingency gives you a short window to hire a professional home inspector to examine the home’s condition and advise you about the severity of any identifiable problems.

You can use the inspector’s findings to decide whether to proceed buying the home as-is, negotiate repairs (or money for repairs) with the seller or walk away without penalty. To give the seller a stronger indication of your interest in the home, you can specify that the contingency will be satisfied unless the repairs exceed a certain dollar amount that you’re willing to pay (and that won’t jeopardize your mortgage approval).

3. Appraisal Contingency

An appraisal contingency allows the buyer to back out if the home appraises for less than the offer price. It’s typical to include this contingency when you need a mortgage to buy a home because the lender will require the home to appraise for at least as much as the purchase price. A buyer making an all-cash offer might not include this contingency.

4. Mortgage Contingency

A mortgage contingency, also called a financing contingency, allows the buyer to back out if they can’t secure financing for the property.

Before going under contract, a buyer can get preapproved for a mortgage to give the seller more confidence that the deal will close. But the lender also has to approve the property—not just the borrower—so this contingency is key unless the buyer is paying cash.

Further, buyers sometimes unknowingly do things that jeopardize their mortgage approval (like taking out another loan before closing). They can also run into bad luck, such as getting laid off while under contract, which ruins their approval.

5. Title Contingency

If the property doesn’t have a clear title and the title defect can’t be fixed easily, this contingency gets the buyer off the hook. Even all-cash buyers should include this contingency to ensure they won’t face ownership disputes after closing.

A clear title is also essential for securing title insurance, which lenders require and buyers can (and arguably should) purchase.

6. Home Sale Contingency

The buyer or seller might want to include a home sale contingency in the contract. For the buyer, this contingency would specify that the deal will only close if they’re able to sell their existing home. The seller might continue to accept new offers in this case, and the listing might say “contingent with kick-out,” “active with kick-out” or “bumpable buyer.”

7. Homeowners Insurance Contingency

Some properties, especially in disaster-prone states like Florida, can be expensive to insure or even uninsurable due to their location or loss history. Most people want homeowners insurance to protect their investment, and even if they don’t, their mortgage lender will require it. Some properties also require windstorm insurance and flood insurance.

It’s crucial for buyers to use an insurance contingency to give themselves an out if they learn that it will cost far more than expected to insure the home they’ve made an offer on.

8. Homeowners Association Contingency

When a home is part of a homeowners association (HOA), examining the association’s rules, meeting minutes and financial status before closing is essential.

This contingency lets the buyer escape if they find out they won’t be able to rent out the home, have three dogs, park their truck in the driveway or something else that’s important to them but violates the HOA’s covenants, conditions and restrictions. It also lets the buyer get their earnest money back if they learn the association isn’t financially stable.

Contingent Status Types

When a home is under contract but the sale hasn’t closed, the listing or yard sign may indicate the stage of the sale process. Here are the status types you might see and what they mean.

Contingent

The buyer hasn’t yet met all the contingencies in the purchase agreement. You might be able to put in a backup offer if the seller is accepting them. Another term for this status is “under contract.”

Active Contingent

An active contingent listing means the seller has accepted an offer with buyer contingencies but is accepting backup offers in case the deal falls through. This type of listing might also be called “contingent: continue to show” or “active under contract” if the seller is allowing agents to let backup buyers view the property. It might be listed as “contingent: no show” if they aren’t.

Contingent With Kick-Out

This status means the seller has accepted a contingent offer from a buyer but can kick the buyer out of the agreement if the seller gets a better offer. In other words, this seller is still accepting offers. Typically, the contingent buyer will have an opportunity to remove their contingencies before the seller accepts the new offer.

If the offer doesn’t have a kick-out clause, the home might be listed as “contingent with no kick-out.” The seller might be accepting back-up offers but won’t go under contract on any of them unless the buyer fails to meet their contingencies.

Contingent Probate

The seller has accepted an offer, but the probate court must approve the sale before it can close. Other potential buyers may be able to attend a court hearing and make a more competitive bid to purchase the property. This status can come up when the property of a deceased person is being sold as part of settling their estate.

Short-Sale Contingent

The seller has accepted a buyer’s offer, but the deal can’t close unless it’s approved by all lenders and lienholders with a secured interest in the property.

Pending

The buyer has met all the contingencies in the purchase agreement. The sale should close, and your best bet is to find another property to purchase. If this home is particularly desirable to you, however, it doesn’t hurt to contact the seller’s agent and let them know you’re interested—just in case the deal falls through at the last minute. The listing may even say “pending – taking backups” if this possibility exists.

Pending – Over Four Months

This status can appear when a sale is taking a long time to close or when the listing agent doesn’t update the property’s status after it sells.

What’s the Difference Between Contingent and Pending?

A property that’s listed as “contingent” isn’t as far along in the sale process as a property listed as “pending.” If you’re looking at a contingent listing, the buyer might have just gone under contract and satisfied zero contingencies, or the buyer might have satisfied every contingency, but the listing hasn’t been updated to “pending” yet.

A pending status means the buyer satisfied all contingencies in the purchase contract and is near closing. It’s also possible that the sale transaction is complete on a home listed as “pending,” but the property’s status hasn’t been updated yet.

Frequently Asked Questions (FAQs)