What Does Contingent Mean in Real Estate?

Contingent in real estate means that a property is under contract, but the sale is dependent on certain conditions being met. These conditions, known as contingencies, are typically included in the purchase agreement and can be related to a variety of factors, such as the buyer’s ability to obtain financing, the results of a home inspection, or the appraisal of the property.

Common Contingencies

Some of the most common contingencies in real estate contracts include:

  • Mortgage contingency: This contingency allows the buyer to back out of the contract if they are unable to obtain a mortgage loan.
  • Inspection contingency: This contingency allows the buyer to back out of the contract if the home inspection reveals major repairs or problems that the seller is unwilling to fix.
  • Appraisal contingency: This contingency allows the buyer to back out of the contract if the appraised value of the property is below the purchase price.
  • Sale of buyer’s current home contingency: This contingency allows the buyer to back out of the contract if they are unable to sell their current home within a certain time frame.

Other contingencies that may be included in a real estate contract include:

  • Title contingency: This contingency allows the buyer to back out of the contract if there are any problems with the title to the property.
  • Insurance contingency: This contingency allows the buyer to back out of the contract if they are unable to obtain homeowner’s insurance.
  • Repair contingency: This contingency allows the buyer to back out of the contract if the seller is unwilling to make certain repairs to the property.
  • Occupancy contingency: This contingency allows the buyer to back out of the contract if the seller does not vacate the property by a certain date.

Why do buyers include contingencies in their offers?

Buyers include contingencies in their offers to protect themselves from financial loss if something unexpected happens during the home buying process. For example, if a buyer discovers a major repair problem during the home inspection, they can use their inspection contingency to back out of the contract without losing their earnest money deposit.

What does contingent mean for sellers?

When a seller accepts an offer with contingencies, they are agreeing to give the buyer time to meet those contingencies before the sale is final. This means that the property will remain on the market during this time, and other buyers may be able to make offers on the home.

How does a contingent offer become a pending sale?

Once the buyer has met all of the contingencies in their offer, the sale becomes pending. This means that the sale is expected to go through, but there are still a few steps that need to be completed before closing, such as signing the closing documents and transferring ownership of the home to the buyer.

What should buyers and sellers do if a contingency falls through?

If a contingency falls through, the buyer and seller will need to negotiate whether or not to proceed with the sale. If the buyer is unable to meet a contingency, they may be able to ask the seller for an extension or try to renegotiate the terms of the contract. If the seller is unable to meet a contingency, they may be able to ask the buyer to waive the contingency or terminate the contract.

What is the difference between contingent and non contingent?

Contingent means that a real estate sale is dependent on certain conditions being met before it can be finalized. Non-contingent means that a real estate sale is not dependent on any conditions and can be finalized without any additional obstacles.

Here is a table that summarizes the key differences between contingent and non-contingent offers:

CharacteristicContingent OfferNon-Contingent Offer
Dependent on conditions?YesNo
Can the buyer back out?Yes, if any of the contingencies are not metNo
Risk to the buyerLowerHigher
Risk to the sellerHigherLower

Example

A buyer makes a contingent offer on a property that is subject to a financing contingency. This means that the buyer can back out of the contract if they are unable to obtain a mortgage loan. If the buyer is able to obtain a mortgage loan, then the sale will proceed.

A buyer makes a non-contingent offer on a property. This means that the buyer cannot back out of the contract for any reason. If the buyer is unable to obtain a mortgage loan, then they will still be required to purchase the property.

Conclusion

Contingencies are a common part of the real estate buying and selling process. They protect buyers from financial loss and give sellers the flexibility to accept other offers if necessary. If you are buying or selling a home, it is important to understand the different types of contingencies and how they can affect the sale.

Frequently Asked Questions (FAQ)

What is the difference between contingent and non-contingent?

A contingent event is an event that may or may not happen in the future. A non-contingent event is an event that is certain to happen.

Understanding the Meaning of “Contingent” in Real Estate?

Contingent means “depending on specific circumstances.” In real estate, when a home is listed as contingent, it means an offer has been made and accepted, but before the deal is complete, certain additional criteria must be met.

What is the difference between contingency and contingent?

The words contingency and contingent are often used interchangeably, but they have slightly different meanings. A contingency is a plan for dealing with a possible event. Contingent means that something depends on something else happening.

What are 3 examples of contingencies?

Here are 3 examples of contingencies:

  • A company may have a contingency plan for dealing with a natural disaster, such as a hurricane or flood.
  • A software company may have a contingency plan for dealing with a major bug in one of its products.
  • A project manager may have a contingency plan for dealing with unexpected delays or cost overruns.

What are two example of contingent assets?

Here are two examples of contingent assets:

  • A company may have a contingent asset if it has a lawsuit against another company and the outcome of the lawsuit is uncertain.
  • A company may have a contingent asset if it has a claim to insurance proceeds that have not yet been paid out.

What are two synonyms for contingent?

Here are two synonyms for contingent:

  • Dependent
  • Conditional

What is a simple example of contingent contract?

A simple example of a contingent contract is a contract to buy a house. The contract is contingent on the buyer being able to obtain financing. If the buyer cannot obtain financing, the contract is void.

Is guarantee a contingent contract?

A guarantee is a type of contingent contract. In a guarantee, one party promises to pay or perform an obligation if the other party fails to do so. For example, a bank may guarantee a loan that it makes to a business. If the business defaults on the loan, the bank is obligated to repay the lender.

What are contingent liabilities 5 examples?

Here are 5 examples of contingent liabilities:

  • Pending lawsuits
  • Product warranties
  • Guarantees on debts
  • Government investigations
  • Environmental cleanup liabilities

What is the best example of contingent liabilities?

One of the best examples of a contingent liability is a product warranty. A company that sells products with warranties has a contingent liability because it does not know how many products will break under warranty, or how much it will cost to repair or replace them.

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Razib

Razib is a skilled writer with 5 years of experience specializing in technology, finance, automotive and real estate. A BBA graduate from 2014, Razib's passion for these industries shines through in his informative and engaging content. His ability to break down complex topics and stay current on the latest trends makes him a valuable resource for readers seeking to understand these dynamic fields.

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