The word contingent is often used in real estate transactions. A buyer may put an offer on a home that is contingent upon specific terms or conditions. A seller may also add contingencies to a contract that must be met by the buyer.
What does contingent mean in real estate? If you’re a first time home buyer, you may not be familiar with the term. Here’s what it means and how you may use it as a negotiating tool in your purchase.
Contingent = Conditional
Contingent in real estate means that there are specific terms that must be met in order for the sale of a property to be final. Making an offer that is contingent upon certain requirements is a common practice in real estate. When a buyer states that an offer is contingent, it essentially means that it is conditional. There are conditions that must be met before the sale can be finalized. Sellers can also place contingencies on the sale of real estate.
Common Buyer Contingencies
Buyers will often put an offer on a home that is contingent upon a few different conditions, such as:
- Home inspection. A buyer may put an offer on a home that is contingent upon a home inspection. If the home inspection reveals any major issues with the home, the buyer may back out of the contract or require the seller to make repairs.
- Financing. A buyer can make their offer contingent upon securing financing. The buyer may request a certain amount of time to seek and gain approval for a mortgage loan in the amount of the offer they are putting on the home.
- Appraisal. An appraisal is a third party evaluation of the value of a property. A buyer can make their offer contingent upon the results of an appraisal to ensure that they are not paying more than what the property is worth.
- Title. An offer can be contingent upon a clear and uncontested title. Before a real estate transaction is complete, a title search is conducted to establish a clear chain of title. As long as there are no liens or encumbrances, the sale can be completed according to the contract.
- Home sale. Many buyers are financially required to make their offer contingent upon the sale of their current home. If the buyer cannot afford to own two properties and make two mortgage payments, they will need to sell their home before they can officially purchase the new home.
The seller can also add contingencies to a real estate transaction. A common seller contingency may state that if they are not able to find or move into a new home by the closing date of their current home, they may request to rent the property back from you for a certain period of time until they find a new home.
Contingent vs Pending: What’s the Difference?
In real estate, contingent vs. pending has to do with what phase of the contract period you are in. When a home is under contract, the portion of time where the contingencies are being met and worked out comes before the home is pending. Once all of the contingencies have been met and the sale is simply waiting for the official closing date to be complete, it is considered to be pending. Once a contract is pending, it is too late to establish contingencies.
Buying or Selling a Home? The Pamela Walters Group Can Help
Real estate transactions can be complicated. Sale by owner is possible, but it is not recommended without real estate experience. If you’re not sure what terms like contingent and pending mean, the Pamela Walters Group can help you through the process. Our experienced Realtors can advise you on how to establish contingencies that will save you money and prevent mishaps during the contract period.
Call (903) 962-0075 or contact us today to get started.