Understanding Contingent and Pending Home Sales

Understanding "contingent" and "pending" in real estate listings is crucial for buyers strategizing their next move. Here’s a breakdown of what these terms mean and how they play out in real scenarios.

What Does Contingent Mean?

A contingent status means that while an offer on a home has been accepted and it's under contract, certain conditions—known as contingencies—need to be met before the sale can finalize. Here are some common types:

• Inspection Contingency: This clause allows the buyer to have the home inspected. For instance, if an inspection reveals significant mold in the basement, the buyer can either negotiate for the seller to address the issue or opt to cancel the contract.
• Appraisal Contingency: If the home is appraised for less than the sale price, like being offered at $500,000 but appraised at $470,000, the buyer has the option to back out unless the price is adjusted or they decide to cover the gap.
• Financing Contingency: This gives the buyer a set period to secure financing. A typical scenario might involve the buyer’s mortgage approval falling through due to a sudden job loss, enabling them to withdraw from the purchase without penalties.
• Title Contingency: Ensures the property title is clear of liens or disputes. Discovery of an unresolved lien from a previous owner may allow the buyer to pause the transaction until the issue is rectified.
• Home Sale Contingency: The buyer’s purchase depends on the sale of their current home. If they can’t sell their home within a designated period, they can cancel the new home purchase.
• Homeowners Insurance Contingency: Requires the buyer to obtain homeowners insurance prior to finalizing the sale. Difficulty in obtaining insurance, especially if the property is in a high-risk area, can lead to contract cancellation.

What Does Pending Mean?

A pending status indicates that an offer on a property has been accepted, all contingencies have been met or waived, and the property is nearing sale closure. The listing becomes inactive, and while the seller is committed, the buyer may still back out, albeit at the risk of losing their earnest money deposit.

Making Offers on Contingent or Pending Properties

It's possible to make an offer on a property that's already under contract. Sellers may consider backup offers in case the initial deal falls through. However, once a property moves from contingent to pending, entering the fray as a new buyer becomes increasingly difficult.

How Often Do These Deals Fall Through?

While rare, there are instances where deals don’t close. For example, in June 2024, about 5% of agreements were terminated before closure due to financing issues, failed inspections, or appraisal problems, according to the National Association of Realtors.

Bottomline

Understanding the distinction between contingent and pending statuses can significantly influence your home-buying strategy. Knowing the specifics of each can help you make more informed decisions. If you’re considering a move in the real estate market, let’s connect and navigate your options together!

Reference: Nesbit, J. (2024, August 13). Contingent vs. pending and what it means for buyers. U.S. News & World Report.