After months of searching, you’ve found your dream home. There’s just one problem: It’s marked as contingent. Can you still make an offer on a house that is contingent? In a word, yes.
Here’s what you need to know about contingent homes and what they mean for hopeful buyers.
Table of Contents
What Does Contingent Mean On a House?
When scrolling through online real estate listings, you’re likely to come across a few different listing classifications. These tell you what stage of the real estate process a property is in.
A listing classified as “active” means the home is currently for sale and potential buyers are welcome to view the home and make an offer. A home listed as “pending” means a closing date has been set and all contingencies have been met. A home listed as “sold” is officially off the market.
In real estate, contingent means an offer has been accepted on a home, but before the sale can go through, certain criteria (specified in the contract) need to be met.
Many buyers don’t fully understand the contingent house meaning when it comes to their options. Unfortunately, this could mean buyers are throwing away real estate opportunities.
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Can a Contingent Home Fall Through?
Yes, it can.
In 2023, the National Association of Realtors® found that 5% of contracts over a three-month time period were terminated. Reasons for a contract falling through include job loss, unmet contingencies (such as the buyer not being able to sell their home), trouble with financing, home inspection issues, and more.
Financing Falls Through
According to a NAR® report, 87% of homebuyers financed their home. Home loans aren’t finalized until closing, so until a buyer signs on the dotted line on closing day, financing isn’t guaranteed.
Even though buyers may be pre-approved for financing, finalizing the process involves diving deeper into their financial matters. Sometimes unanswered debts come up or loan seekers have overestimated their assets.
Whatever the reason, financing can fall through at any time and push a home back on the market.
Appraisal Is Low
An appraisal must be completed when a home is being bought with a mortgage loan. A qualified appraiser determines the value of the home through a variety of measures, including condition and location.
An appraisal that comes in much lower than expected can push a home back on the market. Buyers might decide they are no longer interested, sellers might not agree to a lower price, or the financial institution providing funding could stop the transaction from taking place.
Surprises in the Home Inspection
A home inspection that turns up unexpected issues can void a contingent contract. Unless the buyer and seller can come to an agreement about who will absorb the cost of each necessary fix, it’s unlikely a new offer will be made or accepted.
A home inspection that finds a home to be in severe disrepair could make it difficult or impossible to secure funding, as well.
The Buyer Is Unable to Sell Their Home
One of the most common requirements written into a contingent offer is that the sale can’t go through until the buyer sells their home. Many homeowners can’t afford two mortgages at once, and this is the best way to prevent an overlap.
However, this leaves the seller in an uncomfortable position, not knowing if their home will officially sell in one week or three months. Unless specifics are written into the contingency contract, a seller may back out of the contract or accept another offer if they feel the sale is moving too slowly.
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How to Put in an Offer on a Contingent Home
In most cases, putting an offer in on a contingent home is an option to consider. Although it doesn’t guarantee you’ll close on the home, it does mean you could be first in line should the current contract fall through.
Putting an offer in on a contingent home is similar to the homebuying process of any active listing. Here are a few responses you could receive:
• Crickets. In some cases, a seller and buyer may have already gone through the requirements and are approaching a closing date. If this is the case, you’re likely to hear crickets. Don’t take it personally.
• We’ll get back to you. If your offer is appealing, you can expect the seller’s agent to want to speak with yours. A quick conversation between the professionals will likely reveal if the deal can take place or not. Keep in mind that if the sellers have accepted a contingent offer without a “kick-out clause,” they may not be able to back out of the contract.
• Yes! If a motivated seller is not happy with the speed of the current buyer, your tantalizing offer could win them over quickly. If your offer is accepted, you’ll move forward with the process required by your lender. If you’ve offered cash, closing may happen rather quickly.
First-time homebuyers can
prequalify for a SoFi Mortgage Loan,
with as little as 3% down*.
Buying a Contingent Home Is Possible, But Is It Worth It?
The answer to this question really depends on how much you want to own the home in question.
Making an offer on a contingent home can take you on a rollercoaster ride. Before you hop on, consider the benefits and potential pitfalls.
Pros
Fast closing. The sellers may be tired of their current contract and ready to move on. If you can put in a better offer, you could be closing sooner rather than later. Before you make an offer, make sure you’re really ready to buy a home.
Less competition. It may not be obvious on an online listing, but a contingent home’s contract could be dead in the water. And while other buyers scroll past the listing because they don’t realize they can still make an offer, you might be able to swoop in and get the home without worrying about competing bids.
Cons
Higher price. It’s less likely you’ll get a great deal when making an offer on a contingent home. In most cases, a contingent offer is high to encourage sellers to hold out if the closing process takes longer than anticipated. You may have to cough up a bit extra to get the home, which is why you should only put an offer on a contingent home that you absolutely love.
Wasted time. Think of putting an offer on a contingent home like asking someone out who is already in a committed relationship. Sure, there’s a chance they’ll say yes. But there’s no way to know if your efforts will be worth it.
The Takeaway
Can you still make an offer on a house that is contingent? Yes. But before you do, make sure the house is worth the added effort and be prepared to move forward quickly in the homebuying process.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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