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What Does Contingent Mean in Real Estate? (Pending vs. Contingent)

What Does Contingent Mean in Real Estate? When searching for a home for sale, you may have encountered a variety of different sales statuses online. Beyond just “for sale” and “closed,” you may have also seen other common sales statuses such as “pending” or “contingent.” These phrases indicate where in the sales process the home is in. Understanding the differences between these statuses can help you identify properties that may still be available for purchase, and will help you better understand how to move forward if you’re interested in putting in an offer on any of them. A contingency clause doesn't necessarily mean all hope is lost for prospective buyers. Different states have different laws as it surrounds contingencies so you'll want to speak with your Realtor around the current local rules for contingent homes. In every market though, things happen where homes that are under the contract may not reach the closing table and the contingency clause usually protects the buyer and sometimes the seller in the event the parties decide to terminate. Without further ado let's jump in: What Does Contingent Mean in Real Estate? “Contingent” or “pending” status means that the home’s owner has accepted an offer from a prospective buyer and that the offer comes with contingencies. Contingencies are conditions that either the buyer or seller (or both) must meet for the sale to go through. For example, a buyer may place an offer on a home, but the offer is contingent on the buyer selling their current home first or contingent on obtaining a mortgage. Also, the buyer is going to want to make sure the home is in good condition during their due diligence phase to ensure the property is in good shape. There are a number of reasons a home that is marked as contingent may 'fall through' though it does not happen often here in Raleigh. What to Expect from a Home that is Marked Contingent: There are different types of contingencies in real estate and each one comes with different obligations and requirements. Knowing what type of contingency it is will go a long way in determining how likely the home is to reach the closing table. In our local market here in Raleigh it is very unlikely a home will be marked contingent and not reach the closing table because North Carolina is not like other markets. Once a contract is accepted both buyer and seller have contractual obligations to live up to and only the buyer may back out at that point. The seller does not have the ability to accept another offer. However, it still does happen where a deal falls through. Most buyers will receive a mortgage preapproval from a mortgage lender prior to submitting their offer which helps them understand whether or not they can qualify for a mortgage prior to making the offer on the home. This preapproval letter doesn't mean the information the buyer provided is totally accurate and often times the mortgage contingency will be a reason a buyer is forced to walk away from a home. If the buyer lies about their assets, their income, or whether or not they have paid the prior year's taxes the preapproval letter might mean nothing. With interest rates so low most folks are able to find ways to qualify for their home purchases, however, when the market turns or interest rates begin to rise, you will see a lot more contingency contracts fall through! A contingency comes into play when the buyer already has a contract in hand and a closing date on the calendar for their current home. The property does not change to sold status until the closing takes place, so the contingency protects the buyer if the sale happens to fall through for any reason. This type of contingency does not allow the seller to accept other offers on the property for a certain period because they have contractual obligations. When the home is marked contingent, the seller may still accept back up offers. What Does Pending Mean in Real Estate? After all, requirements have been met (as defined by both buyer and seller), and a contract is executed, the listing status changes from an active listing to pending status. When an offer has been accepted, and the only two steps that are left are the final paperwork and closing, the sale status switches to “pending.” Unlike contingent deals, pending status does not mean that the sale is still active, so other prospective buyers cannot place offers on the home. Can you put an offer on a house that is contingent? Most contingent listings will allow other buyers to place offers on the home. This is because contingent deals are still technically active listings and can fall out of the contract if the buyer does not meet the requested provisions. For example, if the buyer’s contingency depends on their ability to sell their current home, the seller will most likely want to consider other offers if the buyer is unable to sell their current home. Read more at https://www.raleighrealtyhomes.com/bl...