What Does it Mean When a House is Contingent?

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Have you encountered a house listing that says “pending” or “contingent”? These phrases help you understand what stage of the sale process the home is in. But more specifically, What does it mean when a house is contingent or pending?

What Does it Mean When a House is Contingent?

When a house for sale has a contingency, either the buyer or the seller (or both parties) must meet certain conditions for the home sale to go through. A contingent house listing means there is an accepted offer on the house, but specific criteria must be met before the sale can become final.If the house is contingent, it is still considered active on the market. However, it’s kind of like it’s on pause. 

For example, a seller may accept an offer on their home from a buyer. However, the sale may have a contingency requiring the buyer to sell their current home to qualify for the mortgage approval.

Other contingencies may include the home’s appraised value and the home inspection.

Contingent vs. Pending

A contingent sale is different from a pending sale. For the listing to change from contingent to pending, the offer must be accepted and all criteria and contingencies must be met.

Pending deals are not considered active listings like contingent deals. The home will show as “pending” until all legal paperwork is complete. 

Different Types of Contingencies

When looking into buying a home, you may come across several different contingency types. The multiple listing service, also known as the MLS, is where most homes are listed for sale.

The MLS uses various terminology when describing different contingency scenarios. The following can help explain those different terms for you.

Home Inspection Contingency

A Home Inspection Contingency is reliant on the home inspection report. The inspector will assess the home’s condition, looking at areas that might not be clearly visible or unnoticed by a home buyer.

For example, a buyer might not realize that the home’s flashing is installed incorrectly, which can lead to a roof leak.

Suppose the inspector discovers major issues in the condition of the home. In that case, the buyer may choose to back out or work with the seller to renegotiate the deal. The buyer may pay for the issues to be fixed, or both parties may agree on a reduced price so that the buyer can fix the issue once the purchase of the home is complete.

Mortgage Contingency

A Mortgage Contingency refers to the amount of time a buyer has to secure financing. As a seller, you can find out more about a buyer’s timeline by asking for some information upfront.

First, does the buyer have a pre-approval, not just a prequalification, for a mortgage? If so, that pre-approval will put the buyer much closer to securing a mortgage since preliminary paperwork is already completed. Not having to complete all that paperwork after an offer is accepted can shave off valuable time during the financing phase.

Appraisal Contingency

An Appraisal Contingency is related to the securing of a mortgage. A seller can list a house for any price. However, a mortgage company will only finance the value of the home up to the appraised value.

That means, if the buyer does not have the cash to pay the difference (or doesn’t want to pay), the deal may fall through.

Title Contingency

To purchase a house, it must have a “clean title.” That means there cannot be liens on the property or other issues, like easement problems.

A quick title search will bring any title issues to light during the closing process.

Home Sale Contingency

This refers to when a buyer needs to sell their home before closing on a new home.

Contingent – With Kick-Out

This occurs mainly in a seller’s market. That means a seller can continue to consider other offers until your contingencies have been met.

While contingencies can protect buyers, they can also hinder the closing process and ultimately cause a buyer to lose out on a home.

Contingent – With No Kick-Out

This occurs mainly in a buyer’s market when sellers have a more difficult time selling their home.

A seller may accept a contingency with “no kick-out,” meaning they cannot accept new offers on the home while the contingencies are being worked out.

Contingent – Continue to Show (CCS)

A home with a Contingent – Continue to Show status, is one where the seller has accepted an offer, but several different contingencies must be addressed.

The buyer will be working on completing the contingencies, but the home is still available to be seen by other potential buyers. Offers can still be submitted.

Can You Make an Offer on a House with a Contingency?

In many cases, contingent listings will still accept new offers to be placed on the home. That is because most contingent deals are still considered “active” until all the criteria have been met. Since the deal can fall out of contract if not all provisions are met, the sellers can collect additional offers.

Suppose during this process, the buyer cannot meet the contingency conditions, like being unable to sell their home. In that case, the seller can then sell to a different buyer.

For example, if the buyer only has two weeks to sell their home to meet the contingency, but does not, then the seller may choose to accept a different offer.

If all conditions are met, the status of the home being sold will change from “contingent” to “pending.” However, that does not mean that the deal is closed. All legal paperwork must be cleared and completed before the deal is final. It can still fall out of escrow at this point.

Do Sellers Have to Agree to Contingencies from a Buyer?

No, sellers do not have to agree to contingencies. Though whether or not they do largely depends on the market demand.

While sellers do not have to accept any contingencies from a buyer, it can impact their ability to secure a buyer. If buyers cannot include contingencies with their offer, such as selling their own house, it will limit their ability to purchase the home. They would be forced to move onto another home that will allow it.

On the other hand, in a strong sellers market, you will likely find that sellers do not have to worry as much about accepting contingencies on an offer. That is because in a strong sellers market there is a huge influx of buyers. The seller will likely not have an issue finding a buyer that will make a contingency-free offer.

How to Avoid Contingencies When Selling?

If you’re looking to sell quickly and don’t want to be held up by contingencies, companies that buy houses for cash may be the solution.

At Tropic Coast Homes, we buy houses in Southwest Florida in as-is condition for cash.

Get a no-obligation cash offer to consider all of your options!

Read Next: Are Companies that Buy Houses for Cash Legit?