What Does Contingent Mean in Real Estate Transactions?

According to NAR, the number of sales nationally declined to an annual pace of 4.28 million homes in April 2023, well below historical averages.

If you’re a home seller, this is great news. However, receiving several offers on the first day doesn’t necessarily mean that the length of time between accepting the offer and closing on the deal will move any faster. That is unless you accept a cash offer with little to no contingencies.

Most people purchase homes using financing from a lender. This means that there are a number of steps that need to be taken in a specific order as you move towards the closing. When you’re searching for homes as a buyer, you’ve likely seen listings that have a “contingent” status.

What does contingent mean on a house? What is the difference between a status that says “contingent” and one that says “pending”? Let’s dive into everything you need to know.

What does contingent mean on a house?

If you are like most homebuyers, you typically spend a little time (ok, a lot of time) looking at home listings online. You might notice that next to the listing price, some homes might say that they are “contingent” or “pending” rather than “for sale.”

There can additionally be other information listed here. You’ve probably seen listings that say they are “pending, taking backups” or “contingent, continue to show.”

What does contingent mean on a real estate listing? It means that an offer has been accepted by the seller of the home. However, this offer had at least one if not more conditions or contingencies that need to be met in order for the sale to go through. Until the contingency is met, the listing will still technically be active.

Once the contingencies have been met, the status of the home will switch to pending.

What does it mean when a house is contingent vs. pending?

As opposed to “contingent,” pending means that both parties are moving forward with the sale after the offer has been accepted. This means that you likely won’t want to put in an offer on the home, as the process has moved to the next stage.

The period of time between the resolution of contingencies and the close of the sale is when the transaction is pending. Essentially, the deal is as final as it’s going to be before the money and keys exchange hands.

What are the types of contingent offers?

There are a number of different contingencies in the world of real estate. However, some of them are far more common than others. Let’s take a look at some of the most common types of home contingencies.

Home inspection contingencies

It is common for there to be an inspection contingency when an offer is made on a home. Lenders often require this contingency to ensure that the property is worth the amount of money they will be loaning. This type of contingency means that the parties can’t move forward in the buying process until an inspection has been completed.

Inspections can turn up a number of issues. These can include structural or foundational issues, insect infestations, or issues with asbestos or mold.

Appraisal contingencies

For people who are using a mortgage to buy a house, it is typically required that an appraisal be done to the property. This is so that the mortgage lender can make sure that the house is at least worth the price of the offer that was accepted.

The appraiser will look for any high-value features, add-ons, or damage that will detract or add to the value of the home. You can end up running into issues if the property is appraised for a lower value than the offer.

Financing contingencies

If you are going to take out a loan to buy a house, a financing contingency can be a good idea to include in your offer. This offers a way for you to walk away from the deal if you aren’t able to obtain a loan. It can be quite difficult to work with mortgage lenders, and they can deny your request for a loan if anything major has changed since your pre-approval.

Without a financing contingency, you could still be contractually obligated to purchase the home even if you aren’t able to get financing.

Home sale contingencies

This is an agreement between the seller and the buyer. In this agreement, the seller agrees to remove the home from the market for a certain number of days. During this time, the buyer will try to sell their own home.

This can be a risky contingency offer and is therefore not as common as the others. In a seller’s market, it is common for sellers to accept offers that don’t have a home sale contingency over one that does. This is because the deal won’t go forward if the buyer isn’t able to sell their own home within a set period of time.

If the buyer isn’t able to sell their own home for any reason, the seller is left back at square one. They likely also missed valuable time on the market during the height of the selling season.

Types of contingency status

Real estate agents can mark the status of a contingent deal in a number of ways. Here are some of the indicators you might see on a listing site and what they mean.

Contingent: continue to show

This also might be marked as a “CSS” status. Buyers can choose to go this route during the contingency period if they have concerns about the home sale going through. In this instance, buyers can still view the home and make offers.

Contingent: no show

When a seller is more confident that the offer they accepted will go through, they might choose to stop showings. This also indicates that other offers won’t be made, as showings are typically a necessary step before making an offer.

Contingent: with/without a kick-out clause

A kick-out clause means that there is a contingency deadline that is in place. This means that the requirements of the deal need to be met within a certain period of time. If there isn’t a kick-out clause, it means that there isn’t a set timeline within which the contingency period is moving forward.

Short sale contingent

Short sales are a method for homeowners to sell homes that have a mortgage that is underwater. This means that they are choosing to accept an offer that is less than the amount they still owe on the home loan. This can be a very lengthy process, as the bank is much more involved.

What are the types of pending sales?

There are also a number of different types of pending sales when it comes to real estate. Let’s take a look at some of the most common ones.

Pending – taking backups

If you see this status, it means that the seller does not have total confidence that the offer they accepted will go through. They might be concerned that the buyer is having financing issues or other problems. During this time, you can still place an offer on the property that the seller can accept if their current deal doesn’t end up working out.

That being said, the seller can’t just walk away from the current agreement in favor of a backup offer that is higher. The deal has to fall through on its own for a seller to then go to the backup offers they have.

Pending – short sale

When you see this next to a listing, it means that the home is under contract but it is still waiting for approval from the bank. A short sale is a tactic used by property owners to avoid foreclosure. However, each portion of the sale needs to be approved by the bank.

This process is much slower than a conventional sale. It can take a particularly long time for banks to approve each part of the sale. It is common for these deals to fall through during this stage, as the buyer has ample time to find a property that they can close on much sooner.

Pending – more than four months

If a listing has had a pending status for more than four months, the MLS system automatically flags it with a “more than four months” status. The might mean that the listing agent never changed its status to sold. However, it could also mean that the deal is taking much longer than expected to come to a close.

Can you make an offer on a home that is listed as “contingent”?

The best time to make an offer on a house is when there aren’t any pending sales or contingencies. That being said, you can technically make an offer on a home at any point until its status is listed as “sold.”

The second-best opportunity you have to make an offer on a home is when the status states that the sellers are accepting backup offers. For properties that have a non-backup contingency or a pending status, it’s most likely not worth your time to try and make an offer. You can keep an eye on the property to see if the status changes and in the meantime look around for another property that suits your needs.

How to reduce the risk of your home sale falling through

Selling your home can be a lengthy, stressful, and overwhelming process. First, there is the period of time when you are preparing your home for sale. This might mean repainting, landscaping, making repairs, decluttering, staging, and more. Next, there is a period of time where your house has to be kept in perfect condition for showings and open houses.

(If you’re wondering how to sell your house fast, check out this article.)

Finally, the day comes: you receive an offer! Unfortunately, you are only a few paces down the road to turning over the keys and receiving the check, though.

The mortgaging process slows down how long it takes to sell a house in a major way. However, if you sell your home to a cash buyer, you don’t have to deal with any of these hassles.

Cash buyers, by definition, aren’t working with a mortgage lender. They also commonly buy homes as-is, which means that you don’t have to spend time and money sprucing the place up and making repairs.

Some cash buyers will still want to do an inspection and an appraisal, while others might not. Either way, selling your home to a cash buyer can be a remarkably faster process than selling to someone who is receiving financing. There is also less of a chance that the deal will fall through, as you can verify that the buyer has the funds to make the deal happen.

If you’re interested in learning more about cash buyers, check out this article on iBuying.

Are you selling your home?

If you’re selling your home on the open market, it can be a bit of a research project. It’s worth learning the answers to questions like “what does contingent mean on a house?” and “what should I expect from an inspection?”

There are few things as stressful in life as waiting for a real estate deal to go through. When you are selling your home, you likely have many other aspects of your life riding on the outcome that the house is sold within a reasonable timeline. If there are issues during the contingency process, it can be disheartening and leave you starting over from square one.

Are you interested in selling your home to a cash buyer to avoid all that nonsense? If so, find out how much your home is worth to an iBuyer today.