When looking for a new house, you’ll come across homes in various stages of development. What should you do if the house you want is listed as “contingent” or “pending”? What does the term “contingent” signify in the real estate world? In real estate, what does the term “pending” mean? Knowing the difference between pending vs contingent properties can help you identify homes that you might still be able to buy, as well as how to proceed if you are.
Here’s how to tell the difference between contingent vs pending offers in real estate, and if you may make an offer on a house that has one of these statuses.
What is the difference between contingent vs pending?
The distinction between pending and contingent is the number of events that must occur before the house sale may be completed. Both words indicate that the seller has accepted an offer; the distinction is in the stage of the selling procedure at which the home is:
- Pending: A pending house implies that the prospective buyer has satisfied all of the conditions.
- Contingent: A house that is classified as contingent still has certain conditions that need to be addressed.
Additional offers may or may not be accepted by the seller of a pending or contingent house. It depends on how probable they believe the deal will conclude.
What is a contingency in real estate?
When a property is listed as contingent, it means the seller has accepted an offer. Because they are likely to fall out of the contract if required provisions are not met, contingent transactions are nevertheless live listings. If all goes according to plan, contingent transactions will be moved to the pending stage.
Read more>> What Does Contingent Mean In Real Estate?
What does pending mean in real estate?
The seller has accepted an offer and all contingencies have been met or waived when a property is listed as pending. Deals that are still in the works are no longer considered active listings. The status of a residence will remain pending until all legal procedures have been completed.
Read more>> What Does Pending Mean in Real Estate?
What are common contingencies?
A variety of factors can influence real estate contingencies. The following are some of the most typical contingencies when purchasing a home:
If you can’t get a mortgage, a finance contingency, also known as a mortgage contingency, permits you to get out of the contract.
Before placing an offer on a house, you should be pre-approved for a mortgage. Even if you have a pre-approval letter, the lender may discover more information during underwriting, your financial status may worsen, or mortgage rates may rise, making it more difficult for you to qualify. In certain cases, you may be unable to obtain a mortgage and, as a result, be unable to purchase the house.
If your lender deems that the home’s worth is less than the purchase price, an appraisal contingency permits you to pull out of the contract.
In order to assess the fair market worth of a property, a professional home appraiser evaluates it from the inside out.
An inspection contingency entails you, the buyer, paying a professional home inspector to examine for serious issues that might affect the house’s value, safety, or livability.
If the house inspection discovers massive issues, you and the seller can work out a solution to keep the purchase together. For example, the seller may do the required repairs or reduce the purchase price by the expected cost of the repairs so that the work may be completed after the closing.
Contingency with a kick-out clause
A kick-out clause in a house purchase contract indicates that the seller and buyer have agreed that the seller will take backup offers as long as the buyer’s offer is conditional on the sale of their home.
A kick-out clause is often used in conjunction with a sale contingency, as explained below. A “48-hour kick-out clause” or “72-hour kick-out clause” may be included in the listing, specifying how long the buyer under contract has to waive their selling contingency and present proof of financing before the seller may accept a backup offer.
Any real estate transaction should include a title search. You’ll pay a title firm to ensure that the seller is the only one who has a legal claim on the property.
If the title search shows title problems that cannot be rectified, a title contingency permits you to walk away. A title contingency, for example, would require the seller to pay off a contractor’s lien from work the seller hasn’t paid for if they want to sell the house to you.
If you can’t sell your present house, a sale contingency permits you to get out of the deal. Assume you’re relocating from New Orleans to Nashville and just want to transfer your possessions once. However, in order to obtain the funds necessary to purchase a new home in Tennessee, you must first sell your present home in Louisiana.
You’ll want to include a sale contingency in your Nashville house purchase agreement so you don’t lose your earnest money if your New Orleans home doesn’t sell inside the purchase contract’s time frame.
Let’s imagine you’ve found a buyer for your property in New Orleans, but the transaction isn’t yet complete. If your buyer can’t close within a certain time frame, a closing contingency, also known as a settlement contingency, can let you walk out of your Nashville deal without penalty.
What are the most common contingencies in real estate?
In real estate, there are several types of pending sales. Some of the most common kinds are as follows:
Pending – Taking Backups
The seller accepted an offer on their property, but something went wrong in the final stages; perhaps there was a problem with the offer’s contingency. In the event that their sale goes through, the seller is now accepting backup offers.
Pending – Short Sale
The accepted offer is a short sale, which means it must be authorized by extra lenders or banks beyond the control of the buyer or seller, which might take a long time to complete.
Pending – More Than 4 Months
For more than four months, the accepted offer has been waiting. This might be the result of stalled talks, construction delays, longer-than-usual processing times, or just an agent’s failure to update the listing status.
How often do contingent offers fall through?
While it’s difficult to say how many dependent or pending offers fail each year, some research suggests that roughly 4% of all house transactions fail. In other words, while the great majority of purchases are completed, agreements can fall apart for a variety of reasons.
Can you still put an offer on a house that is contingent or pending?
It’s vital to remember that you may make an offer on a house at any point during the process, which is why having the most up-to-date information and working with a real estate agent who knows how to manage complicated transactions is crucial. If you fall in love with a house that is contingent or pending, you should contact a real estate agent as soon as possible to discuss your possibilities for making an offer.
How to get a house before it gets pending or contingent
To avoid making offers on properties that are contingent or pending, make it a habit to visit any home you’re interested in as soon as feasible. You’ll need a well-informed plan if you truly want to snag a house that’s labeled as contingent or pending.
Make contact with the listed agent through your agent
Find out how far along the contract offer is – what inspections have been completed? What are the buyer’s and seller’s thoughts on the transaction? Is it possible to make a backup offer on the present contract?
Consider making without-contingency offer
Waiving contingencies or making an offer without them is appealing to sellers, and depending on the contract they’ve signed, it may allow them to convince their present buyer to drop their conditions or walk away from the discussions entirely.
Write a personal letter
It doesn’t hurt to write a personal appeal to the present homeowners if there is a contingent or pending house that you simply can’t pass up. It’s not always feasible to determine the dynamics of a house sale, regardless of the listed status or what the listing agent says. If the homeowners are dissatisfied with the discussions, submitting a compelling offer accompanied by an equally convincing letter may give you an advantage over the existing purchasers and any future bids.
Contingent vs pending offers are common In real estate, and buyers and sellers should understand what they entail and how to handle them. In all circumstances, the deal has not been completed and there is still a possibility that it may fail. Make it essential to address conditions and pending statuses with your agent whether you’re making an offer or trying to sell your house.
To reinforce your knowledge in this field, you could take our Real Estate practice exam on either website or application available on both IOS and Android.