Last year,  6.9 million homes changed ownership in the U.S. However, what is not as clear is how many home sale transactions fell through. It is not uncommon for a buyer to make an offer, the seller to accept the offer, but the property doesn’t change hands. Why? There are many reasons, including problems with financing, appraisals, or home inspections. Another widespread reason that home sales fall through has to do with contingencies. If you’re wondering, “what does contingent mean in real estate?” read on for everything you need to know.


Home Sales: What Does Contingent Mean?

Merriam Webster defines contingent as “dependent on or conditioned by something else.” Therefore if you see a home for sale online, which states that it is contingent, the owner will sell the home to a buyer providing certain conditions are met. There are a wide variety of contingency clauses. Both the buyer and the seller have the option to add a contingency clause to a transaction.


Examples of Contingencies Sellers May Demand

Standard contingency clauses that may be demanded by sellers include:

  • The buyer must have the property inspected within a stated timeframe.
  • Sellers also occasionally demand a kick-out clause. This clause allows the seller to continue to market their home after they have accepted a buyer’s offer. A kick-out clause is a safeguard that protects the seller in case the buyer doesn’t fulfill their contingency obligations.


Examples of Contingency Clauses Buyers May Demand

Buyers can also add contingency clauses to their offer. Examples may include:

  • An appraisal contingency, which states that the buyer will only buy the home if it appraises for a specific value
  • Repair contingency, which says that the buyer will only buy the home if particular repairs are made to the house by a set date
  • Inspection contingency states that the buyer will only buy the home if the inspection verifies the house is structurally sound.
  • A home sale contingency allows the buyer to sell their home before purchasing the home they have offered to buy.


Financing Contingencies

Contingencies can also apply to the financing of a property. So, what does contingent mean when it comes to a home loan? A financing contingency, also known as a mortgage contingency, provides the buyer with the time necessary to apply for and secure a home loan. This contingency protects the buyer from being forced to purchase the home if they cannot obtain a home loan. Financing contingencies are ubiquitous in real estate transactions.


Should I Include a Contingency as a Buyer?

There are instances where including contingency clauses is necessary. However, adding too many contingencies in a seller’s market may result in a rejection of your offer. In a buyer’s market, adding contingency clauses is less risky.


Pending vs. Contingent Home Listings: What is the Difference?

Homes listed as pending are not the same as homes listed as contingent. Homes that are pending means that there are no contingencies to be met for the transaction to proceed.


Get Answers to Your Real Estate Financing Questions in Oregon

At Strategic Mortgage Solutions, we aim to be your one-stop shop for home financing education. Whether you have a simple question such as “what does contingent mean?” or would like our mortgage brokers to answer other questions about the pros and cons of various home loans, we are here to help. We welcome your questions at 541-275-1148. You may also send us a message online.