A contingent house listing is a part of the homebuying process when an offer has been made and the seller has accepted it, but before the deal can firm up, certain conditions must be met. These conditions are included in the sales agreement and include clauses such as those for obtaining financing and hiring a home inspector.
You may also hear a real estate agent or brokerage referring to a property sale in this stage as “sold conditional.” Provided that the conditions are met, the home sale will be final, but if they are not met, the deal will fall through.
If the resale bidding process doesn’t sound like an appealing option for you as a homebuyer, you may want to consider purchasing a new build, such as these homes coming soon by Paradise Developments.
But if you want to continue looking for or learning about resales, here is what you need to know about contingent house listings and how they work in Canada.
What is a Contingent House Listing?
If a house is listed as contingent or “sold conditional”, this is essentially warning other potential homebuyers that an offer is in the process of potentially being finalized, but some conditions must be completed before the final transaction can proceed.
The Different Types of Contingent Statuses
Purchasing a house requires various steps. These contingencies are provisions in the sales agreement that provide time for appraisals, home inspections, and mortgage approvals, among other things. And due to that, these statuses come in various forms.
Keep Showing
If a property’s status is “Keep Showing”, it means the buyer is trying to meet the contingencies outlined in the sales agreement, however, other purchasers are welcome to schedule showing appointments to see the property and make offers.
No More Showings
This status means after a seller has accepted a conditional offer, they will no longer be showing the house or receiving other offers.
Escape Clause
If the property is sold conditional and an escape clause is included in the sales agreement, the buyer is given a deadline to meet the contingencies. The seller can continue to show the house and receive bids during this time. If the contingencies are not met by the date and time outlined, the deal will be deemed null and void.
Contingent Short Sale
When a seller agrees to accept less than the amount still outstanding on their mortgage, this is known as a short sale. This usually occurs in cases where the seller is trying to avoid foreclosure.
In these instances, because an offer has been accepted, a short sale contingent status informs other agents that the home is no longer for sale. The sale does however need to be approved by the lender.
What Are The Various Types Of Contingencies?
There are different types of contingencies that may be included in a sales agreement. We have listed a few common ones below.
Contingent on a Home Inspection
If the offer includes a home inspection condition clause, the sale cannot firm up until a home inspector inspects the property and ensures the following:
- The inspector does not identify anything the purchaser was not already aware of
- The inspector does not reveal anything the buyer was not already aware of
- The buyer agrees to correct any flaws discovered by the inspector
Many of the problems that are identified through home inspections are simple to address, however, some could be significant, especially when they involve structural difficulties such as foundation problems, a crumbling chimney, or active termites.
Contingent on Appraisal
In an appraisal contingency, the buyer submits an offer, which the seller accepts, but the transaction is contingent on the lender’s appraisal.
If the buyer seeks financial help from a bank, the bank will often order an appraisal of the property to check that the asking price corresponds to the home’s actual assessed worth.
The appraiser will use comparable sales and tax records to calculate the home’s appraised value. If their assessment matches the home’s asking price, the buyer will proceed with the transaction.
Contingent on Mortgage/Financing
When a purchaser makes an offer that the seller accepts, but the transaction is contingent on the buyer securing financing from a lender, this is known as a financing contingency clause.
Numerous challenges can arise when it comes to funding. The lender will look at the buyer’s credit score, debt-to-income ratio, employment tenure and compensation, previous and current liens, and other factors that could influence whether or not they agree to provide financing.
The financing process can take a long time, which is why it always helps if the buyers get pre-approved.
Contingent on a Home Sale
The majority of buyers confront a similar problem: they must sell their present dwelling before they can afford to buy another. In many cases, the buyer will make an offer on the new house subject to selling their current home first.
Many sellers prefer to avoid using this type of contingency since they won’t be able to sell their house until the buyer sells theirs, which creates further complications and can significantly lengthen the process.
Endnote
If a house is listed as contingent or “sold conditional” in Canada, it is a way of informing other interested buyers and real estate agents that an offer may soon be finalized – provided that certain conditions are fulfilled.
Common contingencies include home inspections, financing, and appraisals. Not all contingencies are perceived as equal, however, and buyers should try to limit their conditions to as few as reasonably possible, especially if they are competing against other buyers. Certain conditions, such as the offer being contingent on the buyers’ home sale, can set the sellers back and make the offer unattractive.
For buyers interested in a contingent property, there are instances where sellers will still permit showings and consider other offers. However, the probability of conditional deals falling through is quite low, and due to that, buyers should avoid getting their hopes up about a home in contingent status.
