What Does Contingent Mean in Real Estate?
“Contingent” or “pending” status indicates that the homeowner has accepted an offer from a potential buyer. However, the offer comes with certain contingencies. Contingencies are defined as conditions that either the buyer or seller (or possibly both) should fulfill for the deal to close. For example, a buyer might place an offer on a home. However, the offer may be contingent on the buyer selling their current home first or contingent on them getting a home loan below a specified interest rate. Several factors may cause a home that is marked as contingent to fall through.
What Happens When a Home is Marked Contingent?
Understanding what type of contingency is on a property is vital as it can help determine how likely a real estate deal is to reach the closing table. Once an agreement is accepted, both the buyer and seller have contractual commitments to abide by. However, typically only the buyer may back out of the deal at this point. The seller cannot accept another offer. However, the seller may still receive back up offers just in case the deal falls through.
When does a house go from active to contingent?
When a listing is “active,” this means that the property has not yet gotten any accepted deals, and buyers may view the home and make an offer. If that buyer makes an offer with a contingency, the house may go from active to contingent, if the seller accepts the offers. While other offers may be entertained, you must keep in mind that the original buyer who made an offer on the home will have first dibs, as they can eliminate the contingency and move forward with purchasing the home.
What Does Sale Pending Mean in Real Estate?
After the requirements have been met (as specified by both buyer and seller), and an agreement is reached, the listing status goes from an active listing to pending.
When the seller’s offer has been accepted, and the only things left are completing the paperwork for the closing, the sale status switches to “pending.” Pending status means that the sale is inactive, so other potential purchasers cannot place offers on the home.
What is the difference between a listing marked as “contingent” and “pending”?
When a property listing is marked contingent, it indicates that the seller has accepted an offer that includes one or several contingencies. Essentially, this means that the parties are ready to go through with the sale, assuming that the contingencies are worked out beforehand. Once the original contingencies are settled to the satisfaction of both parties, the listing will become pending. The buyer and seller will then wait for the closing. While some pending listings will still accept back-up offers, it’s generally unlikely for pending deals to fall through. That’s not to say they don’t- it does happen, but it’s not likely.
Types of Contingency Clauses in the Sales Contract
Appraisal contingency: An appraisal contingency typically is put in place for a buyer to ensure they aren’t paying too much for a property. If the appraisal for the home does not come out to equal to or higher than what the sellers are asking for, the buyer can ask the seller to lower the price or walk away from the deal altogether.
House examination contingency: If the house inspection comes back with several problems such as roof problems, pipes concerns, structural issues, electrical deficiencies, and other significant issues, the buyer can ask for a contingency clause until those concerns are repaired. They can also ask for that the price is decreased. If the issues are not fixed, or the price is not lowered, the buyer will have the option to walk away from the transaction altogether.
Additional assessment provisions: There are other potential inspections the buyer might ask for, consisting of radon screening, well water screening, mold, and testing for the presence of lead paint.
Sale contingency: It usually is much easier to sell a home before buying another one, but funding and timing do not always work out correctly. Having a home sale contingency in the contract offers the buyer a certain amount of time to settle and sell on their existing house to finance the new one. This kind of contingency protects buyers if their current home does not sell since the buyer can revoke the agreement without legal consequences.
Financial contingency: Numerous changes can occur after a buyer puts an offer in on a home that might impact whether or not they will be approved for a mortgage, such as handling new financial obligations or losing or changing jobs. Mortgage lenders can also reject a loan to buyers who have high debt or those who have liens submitted against them.
In any event, the listing is still technically active until the contingency has been satisfied. The deal goes into a “pending” status once the offer has been accepted, and the only thing that is left is the final documentation and closing.
Types of contingent and pending statuses
There are numerous types of statuses for homes with accepted offers you might encounter. While you'll most commonly see more generic statuses like contingent and sale pending on sites like realtor.com your real estate agent can always check the local MLS (multiple listing service) for more details.
The seller has accepted an offer that depends upon one or numerous contingencies. However, while the buyer is working to settle those contingencies, other buyers can continue to view the property and send deals.
Contingent-- No Show/No Offers
The owner will no longer be showing the home or accepting additional offers even though the seller has accepted an offer that includes contingencies.
Contingent-- Release/Still Showing
There’s a due date by which the buyer must meet their contingencies. The seller is still showing the house and accepting new offers.
A few kinds of pending statuses you might see include:
Sale Pending-- Taking Back-up Offers.
The seller is still accepting backup offers for the initial offer.
Pending-- Release/Continue to Show.
In this scenario, there is still some sort of release, or kick-out provision, for one of the parties in the transactions. As such, the seller will still show and accept offers in this situation even though the contract contingencies have been fulfilled, and the seller has accepted the offer.
Pending- Do Not Show.
Essentially, this means that the sale is a done deal. The seller isn’t showing the house nor accepting new quotes.
Pending - 4+ months
This status is for a property that has been in the sales process for four months or longer. If this is the status, the listing must also include a tentative closing date.
Much of these phrases overlap, and different real estate groups and Multiple Listing Services (MLS) differ in which phrasing they use. In general, though, anything that states “continue to show,” “release,” or “taking backups” means there is still some hope if you’d like to purchase the house.
Can you put an offer on a home that is marked as contingent?
A lot of contingent listings will allow other buyers to put offers on the house since contingent offers are still technically active listings and can fall out of the contract if the buyer does not meet the contingency. If the buyer’s contingency depends on the buyer’s ability to sell their existing home, the seller will most likely want to think about other deals if the buyer is unable to sell their present home.
If all works out and the buyer can sell his/her home, the contingent deal will change from “contingent” status to “pending” status. There is a slight chance that the seller will not be able to sell their home. If the seller obtains another offer while the house is under contingent status, the seller will contact the first buyer and offer the buyer a certain amount of time to get rid of the contingency - usually 24 to 48 hours. The first buyer will have the opportunity to eliminate the contingency and purchase the home, even if the buyer’s present house has not sold. The seller can move ahead with the second buyer if they are not able to buy the house until their existing home sells (or are unable to satisfy any other contingency they have in the contract).
As a seller, do I have to consent to contingencies from a buyer?
Sellers are not needed to consent to contingencies, however not allowing contingencies might decrease your offers from potential buyers. If buyers are prohibited from including contingencies in their offer, they may be unable to submit an offer. If you receive an offer with a contingency it's always a good idea to consult with your realtor and/or attorney before making any decisions.
Can you buy a house that is pending?
You can submit a backup offer on a home that is pending sale, but generally speaking, it’s relatively unlikely for the initial deal to fall through unless the buyer gets cold feet or is unable to secure a mortgage.
When shopping for a home to purchase or preparing to put your house on the market, it is crucial to understand the various stages that a house sale might go through before reaching closing status. While placing a contingent offer does not guarantee that a buyer will get the home, it does supply a cushion of time for the buyer to sell their present home, protected funding, and so on. Always talk to your realtor before putting an offer on the house, especially one that includes contingencies.