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  • Writer's pictureRachel Barrasso

What's a Contingency?


When browsing websites for new homes, you'll come across many different real estate terms. What are "soaring ceilings" for example? Or, what's a "walkable neighborhood?" While this post won't go into either of those, it will give you all the deets about contract contingencies!

When you look online at homes and you see homes marked as "contingent", or "active contingent", you may wonder what that means for you as a buyer. In our MLS, "active contingent" means that a buyer has made an offer and the seller (after potentially countering back and forth with the buyer) has accepted all the terms and conditions of the offer. All parties have signed and the home is under contract. BUT, there is at least one contingency that will need to be taken care of before the sale can close. Here are some of the most common contingencies.


The buyer needs to sell their house first. Many buyers cannot or do not wish to carry two mortgages and so when they find their dream house, they make their offer contingent upon their current house selling. There are many variations of this contingency, so make sure you and your agent are clear on the terms and timelines of this contingency so that if your house doesn't sell or the sale falls through, you won't be forced to purchase the new house.


The buyer is getting some type of financing. A third of all home sales in 2022 were cash transactions. Although a few of the remaining two thirds were completed with other forms of financing (like loan assumptions or seller financing for example), roughly 66% of the buyers in the past year would have had a financing contingency as part of their purchase contract. This means that if they are unable to get a loan after putting in a good faith effort attempt, they may cancel the contract and receive their earnest money deposit back.


The buyer is getting an appraisal. Most financed transactions will require an appraisal, but not all. If you are putting a significant percentage down, you may get an appraisal waiver. Similarly, if you're paying all cash, you may choose to have an appraisal done for your own peace of mind. Whatever your reason is, an appraisal contingency protects your earnest money in case the appraiser thinks the home is worth less than what you agreed to pay for it. In this case, you can choose to cancel the contract and receive your earnest money back.


The buyer is doing an inspection. Even in the height of the real estate market over the past few years, most buyers were still choosing to do inspections. I think this is one of the most important things you can do as a buyer! Unless the buyer has specifically waived this contingency, it is built into the contract, and most people will do one. Typically it's ten days and afterwards, they can choose to cancel and receive their earnest money back. Buyers can also ask the seller to repair certain items or provide a credit at closing to go towards the repair at a later date.


These are some of the most common contingencies in the real estate contract but it's certainly not an exhaustive list! You could write in anything you want - you could make the purchase contingent upon a certain Bachelor contestant getting a rose! So, next time you see a house you love online but the status is "active contingent", you can try to guess which of these contingencies might apply to the sale. Who knows, they just might be the ones who made their home sale contingent upon having a snow day in March! :)

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