Contingent vs. Pending: Knowing the Differences

What Is the Difference Between Contingent and Pending?

In the home buying process, between offers, contingencies, and documentation, the house listing status goes through several stages. You might have encountered the term “contingent” or “pending” when searching for houses. These terms mainly serve as indicators of which phase the negotiation with the current potential buyer is at. Contingent means that certain conditions must be met by a buyer or a seller before the deal may be closed. Pending means that all the contingencies have been met, and the deal is likely to close soon.

What Does Contingent Mean in Real Estate?

Contingencies are the terms that have to be fulfilled in order for the sale of a house to go through. When a house is listed as contingent, it means that an offer has been made on the house and the seller has accepted it. However, there are contingencies on the offer, which give the buyer and seller the right to back out of the negotiation, if they are not met. Depending on the type of contingency, they can either protect the buyer or seller. The seller would prefer an offer that has less or no contingencies that protect the buyer and vice versa.

Common Contingencies in Real Estate

Contingencies are certain requirements that must be met by a buyer or a seller before they can close on the deal. They can be found in a buyer’s offer for the house, so if a seller accepts the offer with contingencies, they have to meet them before the deal can proceed to a pending stage. There are quite a few kinds of contingencies that you can include in your home offer. Some of the most common ones include the following:

• Financial Contingencies

  This is a contingency that gives the seller the option to opt out of the deal if the buyer cannot get approved of a mortgage. Even when someone has got preapproved for a mortgage, there is still the possibility that they may not qualify when they officially apply, For example, this can happen when something has changed in your financial circumstances since the time you got pre-approved, such as a drop in your credit score. A mortgage pre-approval is still a good asset to have when making an offer on a house as it shows you are a serious buyer who is very likely to secure funding and purchase the house.

• Inspection Contingency

  A home inspection contingency protects the buyer in the case when the home inspection reveals that the house needs some repairing done. For example, imagine that you have made an offer on the house for a certain price and the seller has accepted that offer. However, the home inspection report reveals problems in the electrical system of the house that pose a safety hazard. You do not find the house worthy of its price anymore, and fortunately, you have an inspection contingency that allows you to walk away from the deal. Another option is to renegotiate with the seller a lower price or have them pay for the repairs needed.

• Appraisal Contingency

  Lenders typically require a home appraisal before they give out a mortgage. The lender may not approve of the loan if the home appraisal reveals that the house is worth less than its price. Even if you find the house worth it because of its location or the neighborhood it is in, the lender may not accept to qualify you for that big of a loan. Appraisal contingency allows a buyer to back out of a deal if an appraised value of the house does not match the listing price of the property. In some cases, they may qualify you for the mortgage if you are willing to pay the difference upfront.

• Title Contingency

  A title contingency allows the buyer to back out of the deal if the homeownership title is not clear, which means that another individual or an institution may have a claim to the property. It protects the buyer by not obligating them to purchase the house if the title cannot be transferred to them.

• Home Sale Contingency

  If the buyer needs to sell their current house first before being able to purchase the new one, they can include a home sale contingency clause in their offer. This contingency will give the buyer time before having to purchase the house while still securing the offer. This offer goes well with a bridge loan that allows a buyer to purchase a house before selling their own. On the other hand, sellers may not like this contingency since they will have to wait until the buyer’s house is sold before closing the sale. On other occasions, sellers may not mind, such as in the case when they are looking for their next house.

• Active - First Right

  If the seller is allowed to show the house to other potential buyers and accept better offers, this contingency gives the initial buyer the right to match the better offer. For example, let’s say that you made an offer on a house and the seller accepted it. However, someone else comes along with a better offer which may be a higher price, fewer contingencies, or anything that makes the offer more attractive. The seller should allow you to match that offer before they walk out of the deal.

Categories of Contingent House Listings

There are different subcategories of contingent statuses that may be used to reflect the listing status more clearly. If a buyer sees a listing with a contingent status, it might be possible to find out whether a seller is willing to show a house or even accept a better offer. The following list provides the most common subcategories of a contingent status.

• Contingent - Continue to Show

  Contingent - Continue to Show (CCS) means that the seller is allowed to continue to show the house to other potential buyers, even after accepting the current buyer’s offer. This typically is the case when an offer contains many contingencies and the seller is looking for something better. If you are interested in a property listed as contingent - continue to show, then you should make an offer on it as the seller is still considering other options.

• Contingent - No Show

  An offer has been accepted which is highly likely to end in closing, therefore the seller is not showing the property anymore to other buyers. While you can still try making an offer, it will probably not be considered.

• Contingent - With Kick-out

  In this type of contingency, the seller is allowed to “kick out” the current buyer whose offer they have accepted in the case that a better offer comes along. This means that the current buyer’s offer is at risk.

• Contingent - With No Kick-out

  The seller cannot accept other offers and “kick out” the current buyer. The only occasion when they can do this is when the current buyer does not fulfill their contingencies.

• Short Sale Contingent

  A short sale happens when a house is sold for less than the mortgage balance owed on that house. This happens with the permission of the lender that forgives a part of the borrower’s debt. When a house is listed as “Short sale contingent”, it means that there is an offer on the house, however, the seller continues to show the house in case the current buyer walks away from the deal. A short sale usually happens during a pre-foreclosure process. Houses that are sold during a pre-foreclosure or foreclosure process must be inspected carefully.

• Contingent Probate

  The Contingent Probate status occurs when a property is sold because the previous owner died and did not pay off their debt. Because the debts are not paid off, the lenders get to sell the property on a market to cover the losses. If you are looking to buy a contingent probate listing, make sure to inspect the property and see whether the house is undervalued. Many properties that are sold with contingent probate, are sold similarly to foreclosed properties, so it might be possible to find a good deal in contingent probate listings.

Can I Make an Offer on a Contingent Home?

Depending on the contingencies listed in an offer, some sellers may think that they have a low chance to meet the contingencies and some may not even want to bother with meeting the contingencies. Because of that, it might be possible to make an offer and even buy a property that is currently listed contingent. Even eliminating some contingencies may provide a large increase in the chances of closing a deal.

The initial offer that has been accepted must be taken if all the contingencies are met and there are no other reasons to reject the deal. On the other hand, if the deal does not follow through, a seller may want to find a buyer quickly. Usually, contingent deals do not go through less than 5% of the time. That is where offers made during the contingent stage of the deal may have a better chance to be chosen by the seller. Some contingencies allow a seller to walk away from the deal if it takes a specified amount of time. If this contingency is triggered, a seller may want to find a buyer who can close the deal quickly. It might also be worth considering a backup offer to make sure that you get the property if the deal does not go through.

What Does Pending Mean in Real Estate?

A house listing has the status “pending” when an offer has been made on the house, it has been accepted and all contingencies have been met by both the seller and the buyer. At this phase of the deal, the two parties are completing all the necessary documentation and waiting for the legal work to be processed so the sale can officially close.

There is a lot of room where things may go south during the process of a home sale. That is why even when a house listing status is pending, there is a possibility that the sale may not close. Different pending states describe the situation of the house’s sale and make it easier for other potential buyers to understand the specifics of the deal.

• Pending - Taking Backups

  When something happens in the last stages of the sale, such as a problem with one of the contingencies that were considered met before, the seller may start considering backup offers. This lets the seller have options if the current sale falls through.

• Pending - Short Sale

  During a short sale, approval is needed by the lender or bank, which makes the closing process lengthy. There is not much the two parties in the negotiation can do in this scenario.

• Pending - More Than 4 Months

  It has been more than 4 months since the offer on the house was accepted, and the deal has yet to close. This can happen because of different types of delays in the process of negotiation, documentation, or legal work.

Can I Make an Offer on a Pending Home?

A pending listing means that a buyer and a seller met all the contingencies and are ready to close on the property. This means that the deal is likely to succeed, so the house will be sold. Even though the house is in its last stages of closing, it is still possible to make an offer on the property, but it is unlikely that the offer will be accepted.

When a listing is in a pending stage, a seller has confidence that the deal will go through. This may be a good reason for them to stop accepting new offers to save time and resources. In addition to that, some state laws may prohibit or limit the actions of the seller before closing the deal. If there are no reasons for a seller to walk away from the deal to close another deal, then it is unlikely that they will choose to walk away from their current deal. Once the deal is closing, the buyer and seller have to pay closing costs, and there is no way to back out of the deal.

Is Pending Listing Still on the Market?

It is still possible to find a listing on the market during the pending offer for a house. On the other hand, it is not considered on the market during the pending period. For example, once the pending status is reached, the listing stops counting days on the market. If you see a listed house with a pending status, you may still let the seller know that you are interested in the property, but it will probably be sold.

Making an Offer on a Contingent or Pending Home

You can make an offer on a house at any stage of the selling process, as long as it is before the sale officially closes. The chances of the seller considering your offer, however, vary according to the stage the negotiations are at. For example, if the house is pending, then the owner may not be allowed to accept any offers, as opposed to when the status of the house is contingent.

If you do plan to make a backup offer on a house, make sure to act strategically. The seller already has an offer they have accepted and would be tempted to walk out of the deal only if something better comes along. Consider the following tips when making a backup offer on a house that is contingent or pending.

Work With an Experienced Real Estate Agent

A real estate agent can research and discover the contingencies of the current contract. The agent can also speak to the listing agent and find out in what stage negotiations are in and how the parties feel about the deal. Then the real estate agent can help you prepare a backup offer that would seem appealing to the seller. One way would be to exclude the contingencies that are causing problems in the current negotiation.

Write to the Seller

The seller may be more willing to consider and accept your offer if you write a personalized letter explaining why you love the house and what makes it so special to you. Sometimes, besides the monetary aspect of the deal, a seller may also be interested in who is buying their house. This is why adding a personal touch to your backup offer may increase the chances of purchasing the house.

Be Patient

While you may be eager to convince the seller to accept your offer on the house, you wouldn’t want to seem too aggressive. This might push the seller away. However, you should respond in a timely manner when you receive calls or emails from the seller’s side in order to show your commitment.