What Does Contingent Mean?
When you're searching for a new home, you may come across various sales statuses online, including the status of contingent, pending, active or sold.
These phrases simply indicate the stage of the sales process that the home is in. Understanding the differences between these statuses can actually be quite helpful in finding properties that are still available for purchase. It will give you a better idea of what steps to take if you're interested in making an offer on any of them.
Now, let's talk about contingencies. The rules and regulations surrounding contingencies can vary from state to state, so it's a good idea to have a chat with your REALTOR® about the specific local rules for contingent homes.
In any market, there are instances where homes under contract don't but don't actually close. That's where the contingency clause comes in, designed to protect both the buyer and sometimes the seller if either party decides to terminate the deal. So, when you see the term "contingent", this is what it means.
The dictionary defines contingent as the following:
occurring or existing only if (certain circumstances) are the case; dependent on.
"resolution of the conflict was contingent on the signing of a ceasefire agreement"
That is all well and good, but we are focused on what 'contingent' means in real estate. Well the meaning is still very consistent with our original definition. Its just focused a bit more on the actual circumstances of a transaction as follows:
The seller has accepted an offer, but they've chosen to keep the listing active in case certain conditions aren't met by the prospective buyer.
Can I still buy a home with a status of contingent?
The short answer is 'maybe'. It truly depends on what type of contingency is in place on the home you want.
The seller may legally accept backup offers when the home is labeled as contingent. If the primary contingency contract ends, then the backup offer instantly becomes the active contract.
The mortgage contingency is the most often becomes the reason why a buyer is compelled to withdraw from a property due to false information, rapidly rising interest rates or rapid price increase while searching for a home. Below is a list of the most common types of contingency contracts in Texas.
This is one of the most common contingencies we encounter today. The buyer's obligation to purchase the subject property is contingent on the home appraising for value or the contract price. If it does not, the buyers can walk away from the deal and have their earnest money returned.
In the last few years, we have seen buyers waiving their appraisal contingency in part or in full to secure the contract on the subject property.
This contingency states the sale depends on obtaining necessary financing from a lender. If the buyer cannot do so, the contingency allows them to back out of the sale without penalty. This contingency typically has a finite time period to notify the seller of a buyers desire to invoke this contingency.
This contingency protects the buyer in case a problem is discovered with the properties record of ownership. These issues may encompass an unresolved lien on the property, judgments associated with the property resulting from civil actions, or unpaid taxes. Clearing the title for the new owner requires resolving these liens and judgments. If these matters are not addressed, buyers have the option to withdraw from the sale without facing any penalties.The Sale of Another Property
Home Inspection Contingency
By including this contingency, you express your intention to proceed with the purchase of the property provided that the home inspection does not uncover any undisclosed issues and does not reveal significant problems beyond your willingness to address. As part of this process, buyers engage a home inspector, arrange for the inspection, and communicate how any identified issues affect the property's sale.
This is commonly handled during the 'unrestricted right to terminate' period or as its more commonly know the 'option period'.
As a seller, do I have to agree to contingencies from a buyer?
Sellers are not required to agree to contingencies. Sellers are typically more open to contingencies when the market is slow or commonly called a buyer's market. When the market heats up for sellers they tend to reject contingencies and look for what is known as a 'clean' offer.