Comparing Contingent vs. Pending in Real Estate

what does contingent mean real estate

You may find that some homes show that they are contingent, while others show “pending.”

This article will explain the differences between contingent and pending and go over some common contingencies in real estate contracts.

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What does Contingent mean?

A real estate contingency is a provision in a purchase agreement that voids the contract if something is not met.

As long as the contingency is met, the contract will remain valid, and the buyer will purchase the home.

A property listed as an active contingent means the seller has accepted an offer, and there is a contingency that needs to be met for the deal to be finalized.

What does Pending mean?

If a property is listing in pending status, it means that an offer has been accepted, and any contingencies have been met. Homes in pending status are no longer considered active listings.

There are a few different types of pending transactions you will see when browsing homes.

Pending taking backups – This means that an offer is pending, but the seller accepts backup offers if the deal falls through. Submit an offer at your own risk knowing it could take months before you find out if your offer is accepted.

Pending short sale – A short sale is when a home is sold for less than the seller owes on their mortgage. In a pending short sale, the seller has accepted an offer and is waiting to be approved by the lender. Often short sales can take months to hear back from a lender on whether or not they will accept the offer or not.

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Common Contingencies

Financing Contingency

A financing contingency means that you must get approved for a home loan for the contract to be valid. If you’re unable to obtain the financing, you will be able to back out of the agreement without fault.

Home Appraisal Contingency

A home appraisal is a professional evaluation of a property’s current market value. Mortgage companies use the appraisal to determine how much money they’re willing to lend on a property.

If the home appraisal comes back lower than the agreed-upon purchase price, the lender will not lend more than a home is worth. Having a home appraisal contingency will let the buyer renegotiate the purchase price if the appraisal is too low.

Active – Kick Out Contingency

If you currently have a home that you need to sell to get approved for a new loan, you’ll need a kick out contingency. Basically, it states that the agreement is based upon the buyer being able to sell their current property.

As you can imagine, sellers are not exactly excited to accept this type of contingency, especially if it’s a seller’s market.

Title Contingency

The title, or deed, is a document that shows the current and all previous owners.

A title company will perform a title check to ensure the title is free and clear, meaning that there are no liens on the property prohibiting the seller from selling the home.

If there are any title issues, a contingency provides the buyer with an option to cancel the agreement.

Home Inspection Contingency

A home inspection is an inspection performed by a third-party to ensure no potential issues in a home. While an inspection is not required, it is highly recommended you get a home inspection before closing.

If there are any issues with the property, you may be able to have the seller make repairs before closing.

Closing Date Contingency

The agreement is contingent on the buyer closing on a specific date. If that date approaches and the buyer cannot close on time, the seller can walk away from the deal. However, oftentimes sellers are willing to wait a few extra days while the buyer’s lender works on getting everything in order.

Making a Home Offer

When you make an offer on a home, you want your offer to stand out from the competition, especially in a seller’s market where sales receive multiple bids from buyers.

Some contingencies are to be expected, as a financing contingency. However, stuffing extra contingencies into your offer make it less likely a seller will accept your offer over another offer without contingencies.

Avoid Making Offers on Active-Contingent Properties

It’s best to avoid making offers on properties that have an active contingency. Sticking with properties that are available and not pending is a good way to avoid frustration.

Add a Personal Letter

Adding a personal letter detailing your individual situation is a good idea in some cases. People like selling their home to other people, explain your situation, let them know a little about your family. Details like this weigh in your favor when there are multiple offers.

Speak to the Listing Agent

Before making an offer, you or your realtor should speak to the agent repenting the sellers to check the status. If there is an active contingent, the listing agent has inside information about how likely the deal will go through.

If the listing agent is fairly confident the sale will be completed, then you should move on.

The Bottom Line

While there is a difference between contingent vs. pending homes, both mean they are currently under contract. An active contingent means a few contingencies still need to be met for the agreement to be finalized.

It’s really best to avoid these types of listings and stick to available properties without pending a sale.

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