What does contingent mean?

Sometimes a home for sale will be listed as "active" one day and "contingent" the next.

Contingent means the homeowner is in advanced talks with one potential buyer, and both parties have drawn up a list of conditions — or contingencies — they must meet before the sale officially happens. Think of contingencies as stipulations that the buyer, seller, or both, must agree to and complete before the property changes hands.

In most scenarios, the homebuyer proposes a list of contingencies for the seller to approve. Presenting a contingency or two is not required, but many homebuyers do so just to make sure the home is in the best shape it can be at the time of sale.

A seller does not have to accept a contingent offer. The seller could reject it or counter. A seller can also accept another buyer's offer during the contingency period.

“An advantage for sellers is that contingent offers can sometimes come with higher offers or better terms, as buyers may be willing to negotiate more favorably to get the contingency accepted,” Christopher Hall, an agent with Coldwell Banker Warburg, said. “Additionally, in slower markets, contingent offers might be the best available option, helping to move the sale process along.”

The contingency period typically lasts 30 to 60 days, but the timeline depends on the type of contingency. To be sure, a pending offer is not the same thing as a contingent one. When a property has a pending offer, it means all contingencies have either been met or waived.

Ultimately, an offer to buy a home with contingencies is a way to back out of a real estate contract if a specific condition is not met.
When a buyers make a contingent offer, the goal is to protect themselves from the potential risks of purchasing a home.

In real estate, there are several types of contingencies:

With a financing contingency in place, the buyer may cancel the contract if they are unable to secure a home loan. This allows buyers to receive a full refund of their earnest money deposit if their financing falls through. 

This contingency centers on prospective buyers selling the home they are living in before the sale by a certain date. If the current residence fails to sell within that time limit, the buyer is not obligated to go through with buying the new property.

This contingency basically means a buyer will not go through with purchasing a property unless a professional home inspector has

“At the very least, having this option helps a buyer with negotiating a seller’s concession toward the cost of repairs or renegotiating the purchase price of the property," said David Sokolowski, real estate broker at Coldwell Banker Warburg. “Whereas if the deal is noncontingent upon the home inspection, then the buyer has to purchase the property irrespective of whatever such issues may exist."

An appraisal contingency gives the buyer the right to cancel the contract if the home’s appraised value comes in at less than the agreed-upon selling price.

“Appraisal contingencies ensure the property is valued at a price that supports the loan amount, protecting buyers from overpaying and giving them the option to renegotiate or withdraw if the appraisal is low,” Hall from Coldwell Banker said.

This type of contingency makes it possible for a buyer to cancel a contract if they discover that the property cannot meet their intended use. A feasibility study contingency is most common where a buyer intends to make significant changes to a property, such as buying land for a new construction home or tearing down a house to build a new one. 

This clause states that even though the home is under contract, the seller can continue marketing the property. If the home seller finds another strong buyer, then the first buyer under the contingencies now has a specific amount of time to finalize the sale. If the first buyer doesn't mean the timeline, then the seller can walk away from the deal and fully entertain the next buyer.

This means that the buyer's offer is contingent upon the home having a clean title free of liens or other obstacles.

This ensures that the buyer can obtain home insurance, a factor particularly important in areas prone to disaster.