Buying a home is an exciting time, but it can also be stressful. Searching for your dream house involves lots of time, effort, and research. It also involves some real estate terms you may have not heard of before. One of those terms is active with contingency. What does active with contingency mean when a home you fall in love with is listed as contingent?
The majority of real estate offers contain contingencies, or clauses. Below we’ll go over what contingent means in real estate, as well as the differences between contingent vs. pending, and more.
What does active with contingency mean in real estate?
First off, contingent is used to describe a house that is on the market and available to buy. A potential buyer has already looked at the home and wants to purchase it. Active with contingency means that an offer on the house has been made, and the seller has accepted it; however, before the sale can be finalized, some criteria needs to be met. The homeowner/seller must resolve the issues or problems.
While contingencies benefit both the buyer and the seller, they benefit the buyer the most. Why? Because they allow the buyer to get out of the contract with no repercussions. The buyer can also get their earnest money back. This can save a home buyer a lot of money, time, and stress.
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Types of Contingencies
The contingencies are clauses in the sales contract which usually include matters that deal with appraisal, home inspection, and mortgage approval. These clauses usually include a deadline or timeframe that defines when the conditions must be met. Some contingencies may vary from state to state.
- Home inspection contingency — When the contingency is a home inspection, the house must pass the inspection in order for the sale to move forward. This is usually done when there is a questionable part of the house, such as the roof, plumbing, electrical system, or the structure of the home.
- Mortgage approval contingency — A mortgage approval contingency protects the buyer and the seller if the seller is not able to secure financing. It also specifies a date when an official mortgage approval needs to be in place — this is usually 7 days before the closing date.
- Appraisal contingency — This clause allows buyers to back out of the contract if a home is appraised for lower than the sale price. The assessment is usually done by a third-party appraiser, and ensures that the investment makes sense.
- Home sale contingency — The transaction is contingent upon the successful sale of the buyer’s current home within a set time frame. If the buyer’s home doesn’t sell by the appointed date, the contract can either be extended or terminated by the seller. Home sale contingencies can be risky to sellers since there is no guarantee that the house will sell.
Active with Contingency vs. Pending
A listing changes from contingent to pending when an offer is accepted by the seller and all contingencies are addressed. Active with contingency listings are still active listings on real estate sites, meaning other buyers can still make an offer.
Once all of the contingencies have been removed and the active contingent stage is completed, the property will show a status of pending. Pending deals aren’t active listings, meaning no one else can make an offer on the home. A home will have pending status until all legal work is completed.
Can you make an offer on a house that is active with contingency?
The short answer is that you can make an offer at any stage of the home buying process. However, it’s not quite that simple.
Owners whose home is in contingent status can accept a backup offer. Your offer will have precedence if the initial deal falls through. The length of the active contingent period varies, but it’s generally a few weeks. However, it may take longer.
When a house has an active with contingent status, it means the closing is not far away. The chances of the home going back on the market are pretty slim.
However, it’s not impossible for the property to go back on the market. That’s why it makes sense for you to make an offer on a contingent home so that you are in position to buy if something goes wrong with that transaction.
How often do contingent offers fall through?
It’s a good idea to know how often contingent offers actually fall through — it helps to measure your risk. According to a survey by the National Association of Realtors, in May 2020, 76% of recent closed sales contained purchase contingencies and 9% of contracts were terminated.
So why were so many contracts terminated? The pandemic is to blame for a portion of terminations. Many buyers lost their jobs, making it impossible for them to purchase a home right now. Other reasons for contract termination include home inspections, financing issues, and other contingencies.
Before the pandemic, only 2% to 5% of contracts were terminated in a month. This means that on average, a contract has a chance of 1% to 10% of falling through.
What if you fall in love with a contingent home?
If you’re in love with a home active with contingency, the best advice is to keep checking back often to see if the property’s status has changed. If you see that the contingency status falls off and the home is not a pending sale, you’re in luck. The door is open for you to place an offer.
If you fall in love with a home that either has a status of either active with contingency or pending, it’s important you get in touch with a Realtor as soon as possible to explore your options.
Get Advice on Active With Contingency and More
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Can you still look at a house if it is contingent?
Yes! If a home’s status is something like “Contingent to Show”, that means the seller has accepted an offer but there are contingencies, which means if the buyers don’t address those contingencies, the property will still be available. Other buyers can continue to visit the listing and submit offers during this period.
Does contingent mean sold?
No. When a property is listed as contingent, it means thatthe buyer has made an offer and the seller has accepted that offer, but the deal is conditional upon one or more things happening, and the closing won’t take place until those things happen.
