What Does ‘Contingency’ Mean in a Real Estate Listing?

When you see the word “contingency” in a real estate listing, it may be one of those real estate terms that make you go, “Huh?” But don’t sweat it. We’ve all been there, and we’re here to help clear up the confusion.

Every home sale is dependent upon certain contingencies. They can make or break a real estate sale, but what exactly is a contingent offer?

“A contingency in a deal means there’s something the buyer has to do for the process to go forward, whether that’s getting approved for a loan or selling a property they own,” explains Jimmy Branham of the Keyes Company in Coral Springs, FL.

If the buyer is having trouble getting a mortgage, or the property appraisal is too low and the bank won’t increase the loan, or there’s some other problem with getting a mortgage, a contingency clause means that the contract can be broken with no penalty or loss of earnest money to the buyer or seller.

So when “contingency” appears in the listing itself, “it means the sellers have already accepted an offer on the property (at least regarding price), but there are still steps to clear before the contract goes fully pending in the system,” says Stephanie Crawford, a Realtor® in Nashville, TN.

These are some common contingencies that could delay a contract:

• The buyer’s mortgage pre-approval letter is still pending.
• The buyer is waiting to get the home inspection report.
• The buyer has a contingency based on the appraisal.
• The buyer is waiting for a spouse or co-buyer, who is not immediately available to sign off on the home sale.

Additionally, if it’s a real estate short sale—meaning the lender must accept a lesser amount than the mortgage on the home—a contingency might mean that the buyer and seller are waiting for approval of the price and sale terms from the investor or lender. Or it could mean the seller and buyer are waiting for the official paperwork for short-sale terms that have been verbally or informally approved.

Not all contingent offers are marked as a contingency in the real estate listing. For example, purchases made with a mortgage generally have a financing contingency.

Obviously, the buyer cannot purchase the property without a mortgage. However, real estate is generally shown as “pending” in the real estate listing, rather than as having a contingency, if the buyer’s only contingency clause is a financing contingency, an inspection contingency, or other standard contingency.

Should you make an offer on a contingency listing?

Your ideal new home might be listed as having a contingency, meaning the sellers have accepted an offer from a buyer, subject to one or more contingencies. So is it still worthwhile to pursue the home?

Most experts say you’re probably too late to the game. But you should never say never, especially if you’ve fallen hard for the house. Even deals in contract can sometimes fall through due to a contingency, so all hope may not be lost.

The seller might be willing to continue showing the property during this time, but if it’s a house you’re excited about, talk to your real estate agent.

It matters what the contingency is for. If the sale has a contingency based on the buyers selling their current home, for example, the sellers may be accepting other offers. If they’re just waiting for an appraisal or fulfillment of a termite inspection contingency, you’re probably too late.

“In the agent comments on the MLS listings (which the general public cannot see), it will typically say what the contingency clause is for and when it will be over,” says Dale Weir, a Realtor in Chesterfield, MO. That should give you a better sense of your chances with the home.

Still, if the pending contract is contingent on a clean home inspection and the buyers back out, you may want to reconsider jumping in yourself. The home inspector might have found something that would make the property undesirable or even make it possible to renegotiate the purchase price.

Sometimes the deal falls apart for reasons that may be quite justified—don’t let your obsession with the home cloud your judgment as a buyer.

If you’re in the home-buying market and the property you like is listed as contingent, you can also place an alert on the listing. That way, you can receive a notice the moment the real estate transaction falls through and is back on the market.

Can you make an offer on a contingent listing?

There are no rules against buyers making an offer on a contingent listing. If you’re up for a waiting game, go for it. But the sellers might not consider the offer, depending on what the sellers (and their real estate agent) have promised the other potential buyer.

To make your offer stronger, consider writing an offer letter to the homeowner, explaining why you are the perfect buyer, or even making your real estate contract one with zero contingencies, or with as few contingencies as you as a home buyer are comfortable with.

Just be aware that it can be a risky move: Make sure that the real estate contract provides an out for you. It wouldn’t be good to lose your earnest money deposit if something troublesome turns up on the home inspection, for example, or if you don’t qualify for a mortgage.

Bottom line: Talk to your real estate agent to determine if it’s wise to make a real estate offer on a contingent listing. Your agent should have a good sense of whether it’s worth going all out for this property or if you’re wasting your time.

If you decide to let the listing go, make sure you are seeing properties you’re excited about as soon as they are listed to avoid this problem in the future. If you’re in a hot market, properties can move fast!

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Experts in Residential Real Estate in Orlando

If you are BUYING or SELLING real estate it’s quiet often the single most important financial decision you make. For the last 30 years we have helped clients buying and selling property in Orlando and the surrounding areas. Put simply, this means the knowledge and expertise accumulated over this time ensures our clients get the best representation possible.

Our experienced agents will help and guide you through the entire process providing valuable support every step of the way.

Questions to Ask Before Buying a Home

If you’re a first-time home buyer—and you spot the property that has everything you’ve ever dreamed of and more—it can be tempting to put pedal to the metal and close the deal as quickly as possible. But slow down! You need to ask lots of questions to help you negotiate with the seller for a good price.

No home is perfect beneath the surface, and few know this better than your real estate agent. That means it’s time to sit down with your agent and pepper them with questions about the property you’re hoping to make your own.

Certain questions seem rather obvious: Should you offer full price? How soon can you close? However, there are many other questions you may not think to ask an agent at this pivotal juncture in becoming a homeowner. But you should! You’re taking on a mortgage, after all.

Here are six questions to ask your agent to flush out what they’re truly thinking. These can help you figure out whether this piece of real estate is really right for you, and what your next steps should be. When you think you’ve found the one, ask your agent the following:

1. Would you buy this house?

This question may be the ultimate litmus test of whether you should continue with a home-buying experience. Ask your agent point-blank whether they’d buy the home for themselves.

If your agent has any reservations about this hypothetical, that’s a waving red flag.

If you get the sense your agent isn’t as enthusiastic about the home as you are, ask why. It could be because of the neighborhood, the home itself, or something to do with the seller. The answer might give you pause, too.

2. What is the sales history of this house, and how would it affect my offer?

Before making an offer on real estate, ask your agent for the property’s sales history, says Chris Dossman, a real estate agent with Century 21 Scheetz in Indianapolis. Ask for information on the last time the home sold and any sales before that.

Follow-up questions worth asking: Was it previously an expired listing? Was the home ever leased? Was it ever a bank-owned property or another type of distressed home?

These factors could suggest that it has been a struggle to sell the property—which could mean you could snap up this home at a bargain-basement price.

3. What contingencies are worth getting—and skipping?

“When buyers and sellers get cold feet about the purchase or sale of a home, they sometimes think they can just back out,” says Linda Sanderfoot, an agent at Coldwell Banker in Neenah, WI.

But when a seller accepts a buyer’s offer, both parties sign a legal and binding contract—an official document that requires the buyer and seller to execute the transaction.

So how binding that contract is depends on the details. Some contracts have contingencies built in that enable the buyer or seller to walk away from the deal without penalty.

Contingencies are often included for a buyer getting approved for a mortgage, a home inspection, and an appraisal.

But note that having too many contingencies tends to turn off sellers, so make sure to strike the right balance by asking your agent for guidance as you negotiate.

For instance, you might be fine waiving a home inspection contingency if the home is newly constructed. With an older home that might need extensive repairs, an inspection nearly essential. Find which contingicies are crucial to clinching your deal by asking your agent.

4. Are there upcoming condo or homeowners association assessments?

When you purchase a condominium or a home within a homeowners association, you’ll receive the HOA’s financial documents, which outline important information, such as reserve funds and CC&Rs (covenants, conditions, and restrictions).

These condo docs and disclosures can be hundreds of pages long. They can overwhelm buyers, who may forget to check if there are any upcoming assessments.

Assessments are periodic one-time payments made to the HOA above and beyond the monthly fee, usually to cover capital improvements or repairs.

Since they will affect your monthly housing expenses and must be paid in addition to your mortgage, you’ll want to know whether they could go up anytime soon—and your agent is adept at navigating these documents to pinpoint the answer to your questions.

5. What’s happening in this neighborhood, and how will that affect home prices?

Good real estate agents hear everything about what’s happening in the communities where they do business, so it’s important for buyers to ask lots of questions.

Although federal fair housing laws prohibit real estate agents from commenting on the demographics of a neighborhood, your agent can still give you advice on whether you’re making a solid investment, based on local housing market trends and economic factors that affect home values.

So go ahead and ask the question: Are the neighborhood’s home prices rising or falling? Are there new amenities (e.g., parks, shopping, public transportation, Whole Foods) being built in the area? Also, try to determine a seller’s reasons for selling.

These are all important things to consider before home buying, and a real estate agent can help you cut through the noise and really tell you what’s up.

6. Can you recommend a home inspector, handyman, and real estate attorney in the area?

Local expertise matters not only with the real estate agent you hire, but also with the other professionals you could meet as you negotiate this real estate deal.

So if you need recommendations for a home inspector, handyman, real estate attorney, or anyone else on your home-buying journey, your agent can answer your questions and make recommendations to boost the odds that it will be smooth sailing from here on in.

Experts in Residential Real Estate in Orlando

If you are BUYING or SELLING real estate it’s quiet often the single most important financial decision you make. For the last 30 years we have helped clients buying and selling property in Orlando and the surrounding areas. Put simply, this means the knowledge and expertise accumulated over this time ensures our clients get the best representation possible.

Our experienced agents will help and guide you through the entire process providing valuable support every step of the way.