what does contingent mean in real estate? If you need an explanation, you are on the right page.

While many of us see a house as dead money, it is still money; and money never dies. The point I am trying to make is that you can make lots of money by buying and holding a real estate property alone.

There are several other possibilities of income also branch out from there. However, the selling and purchasing process of a property is not the same for everyone of them. Each of them has a surprising element that makes the whole process unique.

To be safe, buyers often make their property purchase ‘contingent’ during the purchasing process. But what does the word contingent mean? Don’t worry; I have explained it to you in this article.

What Does Contingent Mean In Real Estate?

What Does Contingent Mean In Real Estate

The meaning of the word contingent is – “depending on specific circumstances.” In real estate, this term means – the completion of a sale depends on whether the contingencies of the sale are being met or not. Listing a house as ‘Contingent’ means that an offer was made and has been accepted. But some additional criteria must be met before the deal is complete.

For example, a buyer makes a continental deal when they agree to the price claimed by the seller (if no problems defined in the contract appear during the inspection.) the property sale depends on the inspection coming clean.

Read More: Tips For Future-Proofing Your Real Estate Development Business

How Does Contingent Offer Work In Real Estate?

How Does Contingent Offer Work In Real Estate

Contingencies in real estate work like the literal meaning of the word in the dictionary. A buyer can state specific criteria to be met on a real estate property before the sales process takes motion. However, the contract is considered void if the criteria are not met. This gives the seller move on with a back offer they had received when the sale was contingent.

The main purpose of this technique is to protect a buyer from a problematic home listing or unforeseen problems with a real estate property during the purchase. So, what is a contingent home?

Now, a simpler example and answer would be as follows –

Let’s say that you are willing to buy a house, and you make the offer contingent on a property with 20 years of roof life (as claimed by the seller.) However, if the inspector sees it has only 8 to 10 years of roof life left, then the property is unacceptable. This will make an active contingency place in the home.

Now the home seller can adjust the price or fix the roof. The potential buyer can also choose to exit or call the deal off without paying any penalties since they had a contingency in place.

So, this explains the contingent meaning of a house. However, there are different common contingencies in real estate. You can read about them in the next section.

Common Contingencies

You can add different contingencies to your contracts during a real estate purchase. Some of the common contingencies are mentioned below –

Mortgage Contingency

Mortgage Contingency

Mortgage contingency lends the buyer a window of time, helping them secure a mortgage loan before a deadline. According to this contingency, the buyer has to find home financing.

However, if they cannot do so while having a contingency, they withdraw from the negotiation without any penalty. This will also give the seller a quick opportunity to get the property on sale again.

Title Contingency

Title Contingency

With the title contingency, the purchaser has the right to do a title search and raise an objection to the property’s title status, which the seller must clear for the buyer to close on the title transfer.

Home Inspection Contingency

Home Inspection Contingency

The home inspection contingency allows the buyer a time window to properly inspect the property before closing the deal. This contingency helps the buyer check the house’s status and ensure there are no issues like leaky roofs, faulty electrical systems, structural defects, and more.

If the seller refuses to repair any serious issues with the property, the buyer can withdraw from the deal. In this case, also, they don’t have to pay any penalty, and the seller can put the property up for sale again in the market.

Sale Of An Old Home Contingency

Sale Of An Old Home Contingency

Some house buyers often fund the purchase of their new home by selling their existing one. However, it is difficult to find a buyer and sell your old house before the contract deadline for your new house.

But buyers with a ‘sale of an old home contingency’ can call off a contract to buy a new house if they can still not find a buyer for the old house before the deadline. Thanks to the contingency in place, they can walk out of the deal without paying any penalty.

Appraisal Contingency

Appraisal Contingency

This contingency allows the buyer to stipulate to safeguard that the property appraises for the minimum indicated price during the contract. Unless the conditions are met, the buyer can nullify the contract and withdraw from the deal.

Homeowners Insurance Contingency

Homeowners Insurance Contingency

The last type of contingency is homeowner’s insurance contingency. According to this contingency, the buyer must obtain the homeowner’s insurance. The inability to get the insurance will allow either of the parties to withdraw from sales.

Read More: Mortgage Rates: How They Have Impacted The Massachusetts Real Estate Market

Bottom Line

When purchasing a property, a buyer must ensure that they have the necessary contingencies in place. They can select to make the property on sale contingent before the sale is complete. I think that you have found a clear answer to -what does contingent mean in real estate?

However, if there are any other queries, you can let me know through the comment section below. I will address your issues and reply as soon as possible. Thank you for going through this article.

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Shahnawaz Alam
Shahnawaz is a passionate and professional Content writer. He loves to read, write, draw and share his knowledge in different niches like Technology, Cryptocurrency, Travel,Social Media, Social Media Marketing, and Healthcare.

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