Whether you are buying or selling a home, the whole journey can feel like you are navigating a serpentine labyrinth where even the language is a bit unfamiliar. All the different terms you hear throughout the process can add layers of confusion to the matter.
Two such terms that can cause confusion around real estate sales are “contingent” and “pending.” Both words are used to indicate the status of a property that is up for sale – but they may not mean exactly what you think. Let’s explore the key differences between the two terms and what it means for you as a buyer or seller.
Contingent: The In-Between Stage
When a property is marked as “contingent,” it signifies that a buyer has made an offer on the home – and the seller has accepted. However, the deal has not yet reached its finish line. At this stage, certain conditions, or contingencies, must be met in order for the sale to proceed.
Most buyers (and sellers) are somewhat familiar with the most common contingencies involved in house sales. A contingent status on a house sale likely means that one or more of the following conditions has yet to be met:
- The home inspection: The buyer probably wants to conduct a thorough inspection to identify any potential issues with the property. This could go easily, lead to new negotiations or even tank the deal, depending upon the results and the willingness of the parties to compromise.
- The financing approval: The buyer’s ability to secure financing is, obviously, critical to a sale. If the buyer’s financing falls through for some reason, the deal may not proceed, and the house could end up back on the market.
- The appraisal: An appraisal ensures that the value of the property aligns with the agreed-upon sale price.
- The buyer’s home sale: In some cases, buyers may need to sell their existing home before finalizing the purchase of the new property. In many cases, the seller may then impose a “kick-out” clause, or a deadline by which time this contingency must be met or the deal can be rescinded.
- A short sale agreement: If the home is being marketed as a “short sale” (where the bank has indicated they will accept less than the value of the current owner’s mortgage), the contingent sale stage can take a long time. Banks move slowly on short sales.
In other words, a home sale in contingent status has a buyer – but the deal is still probably many steps away from actually going through.
Can a Property in Contingent Status Be Shown?
During the contingent stage of a home sale, the property may remain on the market if the seller so desires, and other potential buyers can still submit offers. Frequently, sellers will continue to show their homes while a sale is contingent because they have doubts about the buyer’s ability to seal the deal. Ideally, they hope to receive a back-up offer they can put into place if the first buyers fall through.
If you’re a potential buyer, does it make sense to put an offer in on a contingent property? Well, statistically, no more than 5% of contingent offers fall through – but that is still one out of every 20 deals. If you really love a property and are willing and able to pause your search for another home for a few weeks, it may be worth the gamble.
Pending: The Deal Is Almost Sealed
Once all contingencies have been satisfied, the property transitions to the “pending” status. This stage signifies that the sale is in the final stages of completion, and the property is essentially “off the market.”
In other words, there is very little (if any) doubt that the deal will be finalized. The sale is on the cusp of being finalized, and both parties are moving toward the closing table. The key hallmarks of a pending house deal include:
- All contingencies are resolved: All the conditions specified in the initial offer have been met, waived or effectively renegotiated. All the inspections have passed, and the home appraisal was returned with the appropriate numbers.
- There may already be a closing date: The necessary paperwork and legal processes are usually underway to close the transaction once a deal is marked “pending.” That means that a closing date may already be scheduled.
Can a Property That Is in Pending Status Be Shown?
Most of the time, property owners stop showing a property once the status moves to “pending.” However, some sellers do continue to show their homes and take backup offers. For the seller, this is an act of caution, especially when the market is hot, or they want to get through the hassle of selling as quickly as possible. Real estate deals do fall through at the last second.
If you’re a buyer, you can always make an offer on a home with a pending sale, but it may not be entertained. You must also realize that the odds of your being the one who ends up with the property are very slim.
Whether you’re on the hunt for your dream home or preparing to bid farewell to a property, staying abreast of these terms makes it easier for you to navigate the real estate maze with confidence. Always be aware that real estate practices and terminology have distinct meanings, and don’t be afraid to talk to your real estate professional. You should direct all your questions to them before you proceed with an offer or an acceptance on a home.
