Get Started →

What Is a Contingent Sale?

by | Dec 13, 2021 | Real Estate Glossary

Thinking about buying or selling a home?

Contact an expert agent for a free, no-obligation consultation today!

A contingent sale can be a challenging thing to handle, but they’re manageable if navigated properly. In real estate, a contingent sale sometimes means a buyer is unable to purchase a property without selling one they already own. This ultimately comes down to financing. Or in some cases is based on other contingencies too. A contingent sale is not the same as a pending sale.

So what exactly are these contingencies? They’re the clauses in your contract that give you an out if something unforeseen or unexpected arises. A contingency can be finance related. But usually, it means he seller must meet or improve certain things relating to the house before the sale moves to pending. For example, the buyer’s offer is contingent on the seller completing these tasks. They can help protect the buyer from losing their earnest money. And, they can give you leverage to get the seller to help you deal with whatever comes up.

Home inspection contingent offer

A home inspection contingency is very important to homebuyers. This gives buyers the right to have the home professionally inspected before anything else in the transaction happens. The entire transaction usually relies on a home inspection contingency. So if something is wrong, this allows the buyer to ask that it be fixed. The buyer also also has the ability to try and renegotiate the price, or even back out of the sale. Buyers should always have this clause in a sales contract.

Appraisal contingency

The appraisal contingency allows a buyer to back out of the deal if the home appraises for less than the sale price. It’s almost always in the best interest of a buyer to not overpay for a home. This is unless they cannot let it pass up or it’s a hot real estate market.

During hot real estate markets, an eager buyer might over bid on a property and waive the appraisal contingency. Typically, this is because there are multiple bids competing for the home. In this scenario a mortgage company is only going to cover what the property is worth. So, the buyer would need to bring money to the table to cover the difference.

Mortgage contingency

A mortgage contingency ensures that there is money to back up the sale of your property. With that, it protects the buyer and seller from getting into a real estate sale without a proper loan. Under the mortgage contingency, the buyer has a specified time frame to get a loan substantial enough to cover the mortgage once an offer is accepted.

If a buyer can’t find a lender to provide financing, the buyer and seller have the right to walk away from the sale. This is why it’s better to be pre-approved before the buyer starts making offers on properties. That way the buyer isn’t wasting their time or the seller’s time since you’ll already know that you can obtain a loan quickly.

Title contingency

A buyer can put a title contingency in their contract that protects them if the title search reveals any doubt in ownership of the property. With a title contingency, the buyer can walk away from the deal if anything suspicious comes up. This is why real estate attorneys almost always recommend title insurance.

One example of a title contingency benefitting the buyer is in reviewing potential easements that are on public record. The buyer may not feel comfortable with certain easements. Maybe there is a shared driveway easement for a neighbor that would give other people access to the property. This would qualify as a reason to back out of the deal if the buyer has a title contingency in affect.

Home sale contingency

A home sale contingency can be useful to the buyer because they can ask a seller to take the home off the market so that they can sell their current home. Typically, a time frame is specified to the buyer and they must abide by it in order for the home sale contingency to work.

If the buyer’s home doesn’t sell within the allotted time frame, then the seller is legally able to put their home back on the market and try to find a different buyer. Usually a home sale contingency is not accepted by sellers because it leads to more time spent for the seller to actually sell their house. Which often leads to frustration and sometimes failure.

Right of first refusal

This is another common contingency that you will see in some transactions. First right of refusal works when a seller gets a second or third offer. Essentially, the first interested buyer has the opportunity to move forward with the transaction.

Making an offer without contingencies

Making an offer without contingencies can be relatively risky for buyers, however it is attractive to sellers, depending on the contract they have entered. It may allow them to pressure their current buyer to also drop their own contingencies or leave the all together.

Are contingent offers good?

There is no right or wrong answer on this one. Every situation is different. While contingent offers can pose additional risk, there are times when it makes sense for a buyer and a seller. Talk with your agent to understand what the contingencies are and what the extra steps will be to bring you to a smooth closing.

What is active contingent?

Sometimes a seller chooses to keep a home on the market after accepting a contingent offer. This is called active contingent. The reason a seller will do this is to continue to get back up offers in case the contingent offer falls apart. If you see a home labeled as “active contingent” it typically means a seller has accepted an offer but certain contingencies  need to be met before a sale is finalized.

Looking to buy or sell a house?

Trelora real estate currently serves Atlanta, Charleston, Charlotte, Denver, Phoenix, Raleigh, Sacramento Seattle and Tucson. Our mission is simple: full service real estate for a fraction of the cost. When you hire a traditional agent to help you buy or sell your home, you pay that agent 3-6% of the home’s value.

By working with Trelora to sell a home, our clients save $12,000 on average. When you buy a home with Trelora, we will split our commission with you, up to $6,000 cash back. You’ll also get best-in-class customer service and a team of expert agents who close hundreds of deals per year using our proprietary technology.

Stay up to date on the latest market conditions

Get the best real estate advice from local experts in your inbox. 

The information contained in this blog is for general information purposes only, and while believed to be accurate, Trelora assumes no legal responsibility for accuracy. Information provided within should not relied upon as legal advice. Please consult with your local advisors for independent information regarding availability and applicability in your market.