A contingent offer is an offer from a buyer to a seller with conditions that must be met for the offer to be binding. The contingency is the clause that gives the buyer the right to back out and recuperate any money they've put down if the clause isn't met. The seller can accept, reject or counter the contingent offer.
Cons for Sellers
Extended Time frame: Contingent offers often extend the time frame for completing the sale. If the buyer needs to secure financing or complete additional inspections, it can prolong the closing process, leading to potential delays.
A survey from the National Association of REALTORS® found that in early 2024 only 5% of sales contracts on homes were terminated. Only 13% of sales contracts during those months were delayed before being settled. Buyers and sellers, then, shouldn't assume that a contingency dooms a home sale.
If the buyer cannot remove the contingency, the contract is terminated, the seller can accept the other offer, and an earnest money deposit is returned to the buyer.
As a seller, you hold the power. You can reject, accept or counter an offer. If a contingency is included in an offer, the seller can increase their asking price or request a larger earnest money deposit. Your Realtor® can advise you on what you should and shouldn't accept and the benefits and risks of each offer.
If a buyer's offer contains a condition or a contingency, such as the sale of the buyer's existing home, a bump clause allows the seller to accept the offer but continue receiving offers from other prospective buyers.
It is highly unlikely that the bank will accept a contingent sale. In some rare cases they will, depending on that particular property. It's best to contact the listing agent so they can help you and to see if there is a possibility of the bank accepting a contingency.
It will give you leverage to either negotiate on price or repairs or back off from your decision. This is probably the biggest reason to make your offer contingent.
The contingency period typically lasts 30 days, but it varies by state. If you're buying a house, your agent will help you navigate all of this—especially if there are any contingencies on your end that need to be met before moving forward with a transaction.
The best-case scenario when you submit an offer on a home is that the seller accepts it with no conditions. However, it's normal for sellers to respond with a counteroffer, which means they're open to begin negotiations.
If you're interested in a property that's listed with an active contingent status, you may still be able to make an offer. While the initial offer will take precedence if all the contingencies are satisfied, making an offer can put you at the head of the line if the original deal falls through.
California law, on the other hand, limits the amount of earnest money that can go to a seller should the deal fall through to 3% of the purchase price. There are some exceptions, Stuart says, but this law makes it so few earnest money deposits exceed 3% in the Golden State.
After about 90 days on the market, a property is considered “stale.” When it does finally sell, it's likely to bring a lower price than listed because when buyers notice that a home has been sitting on the market a long time, they assume something is wrong with it.
If the sale goes through, the earnest money is applied toward your down payment or closing costs. However, if the sale falls through due to contingencies outlined in the contract, such as a failed inspection or inability to secure financing, the earnest money is typically refunded to the buyer.
Purchasing a Foreclosed Home
The longer the bank has held the property, the greater the odds that it will seriously consider low offers. You could make an initial bid at a price at least 20% below the current market price, or even more if the property is located in an area with a high incidence of foreclosures.
Contingent continue to show (CCS): This means that the seller has accepted an offer but that the property is still available for viewing until the contingency is met.
Cons: Home sales with any types of contingencies are usually slower than those without. It takes time to satisfy a buyer's contingencies and additional time to communicate that they have been met.
“Home sellers typically choose convenience over a higher-priced offer because it could mean fewer headaches during the process.”
Usually, by closing day, the seller has packed up and departed. On closing day itself, the homebuyer must sign a lot of paperwork that finalizes the deal.
The 48-hour bump clause.
This clause allows the original buyer a period of 48 hours to waive the contingency or increase their bid on the property. If the buyer does not meet the time frame stated on the contract, the seller is free to move on to a second offer.