What Does Contingent Mean?

If you’re buying or selling, you may need a contingency to CYA.

So you’re shopping for a new home, and you find a listing you like. The only thing is that the listing is marked contingent—but what does that mean? It means that the buyer or seller has some stipulations in place to protect themselves during the sale. And this is a good thing.

A home sale is likely the largest transaction you’ll make in your lifetime. The median home price in the United States is $248,857, according to Zillow. Whether you’re trying to sell or buy, you want to protect yourself during the process.

This is where contingencies come in. This article will cover how contingencies work, and what types of contingencies you can add to your offer or acceptance of an offer. Let’s get started.

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What Does Contingent Mean?

A home with a contingent status means the seller accepted an offer from a buyer, but either party placed a contingency on the sale. Most of the time, the contingency is placed by the buyer to protect them during the inspection process.

When you see a home listed as contingent that means that the sale has been agreed upon, but the transaction is not complete. The sale could fall through, which is common. Even more common: offers with contingencies attached to them.

What is a Contingency?

A contingency is a stipulation put in place to protect a buyer or seller in a real estate transaction. It meanest that specific requirements must be met for the real estate deal to go through. There are some common contingencies and some rare ones that may be useful to you during the transaction process.

Types of Contingencies

There are many types of contingencies. They all mean indicate different levels of likelihood that the deal will go through—or how cautious you should be about putting in an offer if the sale falls through. Here is a list of the types of contingencies you may find:

What’s the Difference Between Contingent and Pending?

In some states, there is no difference between contingent and pending statuses on a house. In other states, contingency is the first step in the home buying process. Once the contingencies are met, the seller can change the status to pending.

Types of Pending Statuses

There are three main types of pending statuses you may find attached to a real estate listing. These are:

• Pending taking backups

• Pending a short sale

• Pending extended for many months

In the first scenario, pending taking backups, the seller has accepted an offer but is willing to accept a backup offer if another buyer is willing to make one. In this scenario, the buyer will likely have to offer an amount above whatever the other buyer has already negotiated. This is an excellent position for the seller but a problematic position for the buyer.

Pending a short sale means that the seller has accepted an offer that is less than the remaining balance owed on the mortgage. These types of transactions were common, especially after the 2008 housing market crash, where many homeowners found themselves underwater—where the mortgage is more expensive than the value of the home.

A short sale is a way for homeowners struggling to pay their mortgage, either avoid foreclosure or get out of an underwater home. However, the lender has to approve the sale, and this can take several weeks to several months.

The final scenario, pending extended for many months, is typical for newly constructed homes though rare in the general real estate market. It means that an offer has been accepted, but that there has been a long delay, usually based on the construction schedule.

However, sometimes a house is listed “pending extended for many months” simply because the real estate agent never removed the home from the multiple listing service (MLS). If you’re interested in a house with this status, just ask your real estate agent to inquire about the listing.

Frequently Asked Questions About Home Buying Contingencies

Know Your Contingencies

Whether you are a buyer or a seller, knowing the difference between home sale statuses gives you a better vantage to make or accept offers. Real estate is like a game with rules you can use to your advantage. The more you know, the better you’ll be able to position yourself.

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