The meaning of contingent explained

What does conditional mean in the sale of real estate?

There are more sales statues online than you might expect, especially if you are a new buyer. This sale status includes some that we are all familiar with, such as ‘for sale’ and ‘sold’.

While you may have come across other common statuses such as “pending or conditional” while looking at real estate online, these sales statuses, like the ones you are familiar with, indicate the stage of the sale process the property is in.

It is vital that you understand what they mean to identify properties that may be available for purchase.

Today we want to focus solely on what it means when a property is marked with a “contingent” indicator so that you can understand the real estate market much better in the future. By the time you’ve finished reading, you’ll have an understanding of the definition of conditional in real estate and how it differs from “pending” status.

Buyers and sellers ask all the time, what does quota mean?? By the time you’re done reading, you’ll have a solid understanding of this status in home sales.

There are nuances between pending and contingent that all buyers and sellers should understand.

What does conditional mean in the sale of real estate?

A conditional status on a property means that a homeowner has accepted an offer from a buyer who comes up with some unforeseen circumstances. Contingencies are conditions that the buyer or seller must meet in order for the sale to proceed as expected; these can be all kinds of conditions that are deemed necessary, set up to protect both parties.

For example, a buyer may place an offer on the home, but the offer is contingent on the sale of their current home before the property is considered “sold” in its entirety.

This is just one of the many reasons why a piece of real estate gets flagged as contingent and can eventually fail.

What are some of the most common contingencies in real estate contracts?

When buying or selling a home, there are some typical contingencies that you should be familiar with. These contingencies are considered normal or mundane. Some of them are as follows:

  • A contingency home inspection – for a period of time (usually 7-10 days) the buyer is allowed to inspect the property for structural, mechanical or other safety issues. If there are significant problems found during a home inspection, the buyer may terminate the sale with appropriate notice. The home inspection is a major hurdle to remove and why do realtors do so much? emphasis on preparing for a. A home inspection is the #1 reason home sales don’t hold together.
  • A mortgage contingency clause – most buyers don’t have the luxury of buying a home for cash. They will need to get financing from a lender. The mortgage term gives them a certain amount of time to get a loan for a certain amount. If a buyer cannot obtain financing, the clause allows him to escape the sale without losing his deposit, as long as proper notice is given before the specified contingency date.
  • Contingencies in the sale of a home – as mentioned earlier, a buyer may request a clause stating that they must have sold their home by a certain date in order to proceed with the purchase. A contingency in the sale of a home is rarer and often not acceptable in the real estate markets of strong sellers.
  • Various Contingencies – Real estate contracts can have any number of obscure contingencies that one of the parties must meet for the transaction to take place.

What to expect from a house labeled as conditional?

As discussed earlier, there are different types of contingencies in real estate. Each has different obligations and requirements that must be met before the property is officially sold.

The most common contingency to expect when a property is labeled as such usually has to do with the mortgage approval process a buyer goes through, which they may not be successful in.

This can happen when the buyer lies about his net worth or his total income, although the interest rates are so low that most people can find ways to qualify to purchase the property. However, when the market turns and interest rates start to rise, you will see many more contingency contracts fail because of this.

Other offers may also be accepted as reserve offers when the property is marked as a contingent, as a way of giving the impression that the seller can sell the property.

Although we’ll talk more about that in the next few paragraphs.

Can you make an offer on a house that is conditional?

Can you make an offer on a house that is conditional?
Can you make an offer on a house that is conditional?

Yes, buyers can make bids on homes where there is an unforeseen situation, but a seller can’t just unilaterally accept a second offer without the first sale they agreed to not go through. Real estate contracts are legal and binding.

What about backup offers?

Almost all conditional offers will allow other buyers to submit offers for the property as contingency deals are technically still active in the market and could fail at any time (as discussed earlier) A seller would accept other offers so they can ensure that they have a buyer for a property regardless of whether the buyer’s current contingencies come true or not. However, the buyer with a backup offer would not be able to proceed without terminating the first buyer’s contract.

For example, let’s say a contingency agreement relies on the buyer selling their own property first. If all goes well with the first buyer and they can sell their home to buy the new property from the seller, the conditional status of the property changes from conditional to pending. Everything will go ahead as planned.

However, if the first sale does not go through, a second buyer will be able to proceed.

What is a kick-out clause?

A kick-out clause is another name for a pre-emptive right. With the right of first refusal, a buyer can usually not proceed with a purchase at this time. Usually the reason is that they have to sell their current home.

A pre-emptive right allows them to buy a home if another buyer also comes with interest. The first buyer would be in pole position to say whether they are moving forward or not.

Usually a right of first refusal or kick-out clause gives a buyer 24-48 hours to make a decision.

The first buyer also has the option to remove the contingency and buy the home instead, even if the buyer’s current home hasn’t sold yet. If the first buyer can’t do this, the home seller can contact the second buyer and move on instead.

So if you see an unforeseen listing that you like, get in touch with your real estate agent and let them make an offer on the property. If the seller likes your offer, they will force the current buyer to move on without the contingencies or they will clear the house so you can buy it instead.

What is the difference between conditional vs pending?

In both pending and conditional states, a seller has accepted an offer from a buyer. In many states, you have the choice of labeling your home in MLS as pending or conditional. Many agents mark homes as pending, even if there are unforeseen events. In fact, I am one of them. There’s a reason for this that if you’re selling a home, you need to understand: When you mark a home under contract, your days on the market end in MLS. When you mark a property as contingent, the days on the market keep increasing.

So if the sale doesn’t go through at a later date, it will seem as if the property has been on the market longer than it actually has been. This can be a disadvantage for a seller, as days on the market affect how a buyer sees a property. In popular markets, houses with high market days do not look attractive to buyers.

Final thoughts on the meaning of contingent

Understanding what contingent means is important for both buyers and sellers, as status can influence your decision making. Hopefully, after reading this, you now have a good understanding of the definition of conditional in the sale of real estate.


About the author: The above article about “What Does Conditional Status Mean in Real Estate?” was written by Bill Gassett. Bill has been working in the real estate industry for thirty-three years. He works for RE/MAX Executive Realty in Hopkinton Massachusetts. Bill likes to provide reliable information to buyers, sellers and fellow brokers to make the best possible decisions. His writing has been featured on RIS Media, National Association of Realtors, Inman News, Placester, Today.com, Credit Sesame, and others.


About Rochester’s Real Estate Blog: Rochester’s Real Estate Blog is owned and operated by Kyle Hiscock of the Hiscock Sold team at RE/MAX Realty Group. With over 40 years of combined experience, if you are considering selling or buying, we are happy to share our knowledge and expertise.

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