What does “Contingent” or “Contingency” mean?

“Contingent” or “Contingency” are words we use a lot in the real estate world, but what exactly does it mean?

The Merriam-Webster Dictionary defines “Contingent” as:

  • Likely but not certain to happen; Possible
  • Dependent or conditioned on something else

The Merriam-Webster Dictionary defines “Contingency” as:

  • A contingent condition or event

So a “Contingent” contract means that a buyer has promised to purchase a home IF certain other conditions are met.

A “Contingency” is the condition upon which the buyer will purchase.

Common buyer contingencies include:

  • A Home Inspection Contingency… the buyer will purchase, if they are permitted to conduct an inspection and, after said inspection, they as satisfied with the condition of the home.
  • A Financing Contingency… the buyer will purchase, assuming they can get a loan to finance the purchase price of the home.
  • An Appraisal Contingency… the buyer will purchase, assuming that an independent appraiser agrees that the contract price is fair and reasonable.
  • A Title Contingency… the buyer will purchase, assuming that the owner can convey (give to them) full marketable title.

Typically the majority of the contingencies are there to protect the buyer.  However, we also see seller contingencies some times.  For example, in a “short sale” the seller will have to make the contract “contingent” upon getting approval from their lender(s) to sell the home for the contract price.

MOST contracts are initially contingent on these or other factors.  During the contract period, all parties work to satisfy and release the contingencies as quickly as possible so that they can consummate (complete) the sale.

Because, as the definition indicates, the contract is not “certain” until the contingencies have been removed or satisfied, it’s important to make sure you evaluate your risk before agreeing to contingencies in a contract.  This is an important part of what your real estate agent can help you understand, so you know if you should or should not accept a contingent contract.


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