What Does “Contingent” Mean in Real Estate?

In its basic form, the word “contingent” means that a situation or outcome is dependent on circumstance. For example, what I’ll eat for dinner tonight is contingent on how full I still feel from lunch. Or what I’ll wear to work tomorrow is contingent on the weather.

In real estate, when a home is in the process of being purchased, it can be listed as “contingent”. This basically means that there are some hoops left to jump through before an offer can be fully accepted and the buying process can move forward. 

Here’s an example – you found the perfect house, put in a bid, and it was accepted! But, you wouldn’t feel comfortable shaking hands on it until the house passes an inspection. Since the offer was technically accepted by the seller but there’s still a task that needs to be done to complete the deal for the buyer, this would be a contingent contract.

A pending contract is different from a contingent contract. If a buy is pending, that means all the tasks have been completed, and the process is simply wrapping up. All the paperwork is being finalized, but there’s nothing left for the buyer or seller to do! 

The buyer has determined that they have all the information they need about the property, and they are completely on board with the deal. The seller has accepted the offer and is ready to turn the property over. The listing is no longer accepting showings or offers. The only thing left to do to finalize the sale is make sure the t’s are crossed and the i’s are dotted!

If you’re a buyer, a contingent contract can be your friend! Let’s revisit our inspection example. So, your offer was approved, but your deal is still contingent on the home inspection clearing. Well, what if it doesn’t? 

What if, *knock on wood*, the inspection comes back to reveal horrible damage to the home that would change your mind about purchasing the property? Being in contingency gives you a safety net to fall back on when new circumstances influence your desire to move forward with the deal.

See how this could be helpful? Contingencies are often a little bit more complex than this example demonstrates, but that’s why you’ll hire an Edge Real Estate agent to walk you through it, right? (wink)

Note: You can get out of most any deal in real estate, but without contingencies, you’ll likely lose money by backing out.

If you make an offer on a home and your buy enters contingency, a good real estate agent will urge you to keep looking and even to keep submitting offers on other properties.

Why? Because sometimes contingencies don’t work out – and that’s exactly why they exist. You may be head over heels for the home you’ve got contingencies on, but if that inspection comes back with anything less than flying colors, we promise you’ll be glad you kept your house hunt going in the meantime.

Another reason to keep looking while you wait on contingencies to work out is that many contingent contracts have what’s called a “kick-out” clause. This means that the seller can keep fielding other offers and even accept one if they find it more appealing. This status is also known as “Active Under Contract”. 

When a home is active under contract it means that it is contingent with a kick-out clause. So, there’s an offer that the seller has accepted, but the buyer has some contingencies! The home is still being shown and other offers are still welcome.

 If an active under contract deal gets swooped out from under you, you’re gonna wish you had a few more options on the table! Don’t stop your house hunt on account of a contingent deal, especially if there’s a kick-out clause.

Even though contingencies can work as a layer of protection for you (the buyer), you don’t want to go adding them willy nilly to your contract. The seller may choose an offer with less or no contingencies, if one exists. It’s best to use these sparingly and only when completely necessary to keep your offers looking good. 

There are some pretty standard instances in which it’s smart to include a contingency in your offer. For example, a buyer may place an offer on a home contingent upon:

• • The property passing inspection; 
  • The buyer’s ability to secure a mortgage; 
  • The buyer’s ability to sell their current home; 
  • Getting an appraisal for the buyer’s potential lender; or
  • Obtaining and reviewing all the info on the property’s title history.