Real estate and homes for sale in the South Bay

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What Does Contingent Mean on a House Sale?

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What Does Contingent Mean on a House Sale?Vista Sothebys for sale sign

September 13, 2023 by Matt Goeglein at Fidelity National Title

In the context of a house sale, “contingent” typically means that the sale of the house is dependent on certain conditions being met. These conditions could include things like the buyer securing financing, the completion of a home inspection, or the sale of the buyer’s current home.

For example, if a buyer makes an offer on a house and the offer is accepted by the seller, the sale may be contingent on the buyer obtaining financing within a specified period of time. If the buyer is unable to obtain financing, the sale may fall through.

Another common contingency is a home inspection. If the inspection reveals significant issues with the property, the buyer may have the option to renegotiate the terms of the sale or back out of the deal altogether.

Contingencies are designed to protect both the buyer and seller in a real estate transaction. They give the buyer an opportunity to ensure that the house is in good condition and that they can obtain financing, while also giving the seller some assurance that the sale will go through if the conditions are met.

Types of Home Contingencies

There are several types of contingencies that can be included in a home sale contract. Here are some of the most common.

Financing contingency: This contingency specifies that the sale of the home is contingent on the buyer obtaining financing. If the buyer is unable to secure financing within a specified timeframe, the contract may be voided.

Appraisal contingency: This contingency specifies that the sale of the home is contingent on the home appraising for at least the purchase price. If the appraisal comes in lower than the purchase price, the buyer may have the option to renegotiate the price or back out of the deal.

Inspection contingency: This contingency specifies that the sale of the home is contingent on a satisfactory home inspection. If the inspection reveals significant issues with the property, the buyer may have the option to renegotiate the terms of the sale or back out of the deal.

Sale contingency: This contingency specifies that the sale of the home is contingent on the buyer selling their current home within a specified timeframe. If the buyer is unable to sell their current home, the contract may be voided.

Title contingency: This contingency specifies that the sale of the home is contingent on the seller having clear title to the property. If there are issues with the title, the contract may be voided or the seller may need to take steps to clear the title before the sale can proceed.

It’s important to note that contingencies can vary depending on the specifics of the contract and the state or region where the sale is taking place. It’s always a good idea to consult with a real estate professional or attorney to ensure that your contract includes the appropriate contingencies for your situation.

Understanding Contingencies in California Real Estate Transactions

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One thing that justifiably concerns both home buyers and sellers are contingencies.   Contingencies are basically just conditions that have to be met in order for the purchase of the home to be finalized.  The most prominent contingencies are inspection, appraisal and loan.  The

boilerplate timeframes on the CAR (California Association of Realtors) purchase agreement, or the standard offer, are 17 day contingencies for inspections/investigations, 17 day for appraisal and 21 days for loan.  These are negotiable during the offer and counter but those are the standard timeframes.

So what do they mean?

Every situation may be different so we’ll stick with a normal situation.  What it means is that you have that amount of time to get those tasks accomplished.  For instance you have 17 days (again if that’s the timeframe negotiated) to have any an all investigations, inspections, etc. to completely satisfy your concerns.  On day 17 the sellers would expect you to remove, in writing, that contingency.  California is an active contingency state so contingencies don’t automatically expire on a certain day….they must be removed in writing.  Once contingencies are removed it becomes more difficult to get your initial deposit back (usually 3% of purchase price in our area) unless there is some type of breach of contract by the other party or unless the other party agrees.

Worried about meeting your transaction contingencies in order to have a smooth home sale? I’m here to help! Send me a message with your questions.

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