When browsing online real estate listings, you’ll often encounter properties marked as “contingent” alongside the familiar “active” and “sold” labels. Understanding what “contingent” means is crucial for both buyers and sellers. Essentially, a contingent status signifies that the seller has accepted an offer from a buyer, but the sale is still subject to certain conditions being met before it can be finalized.
So, what exactly does it mean when a house is contingent, and how does it differ from a “pending” status? This article breaks down the meaning of “contingent” in real estate, explores common contingencies, and explains what this status means for potential homebuyers.
What Does Contingent Mean in Real Estate?
In general terms, “contingent” implies that something is dependent on specific conditions being fulfilled. In real estate, a contingent status means that a buyer and seller have agreed to the terms of a purchase and sale agreement, but the deal is conditional upon certain requirements being satisfied. These contingencies protect the buyer and ensure they aren’t locked into a deal that could be detrimental.
For example, a buyer may need to secure financing to purchase the home. The sale is contingent on their ability to obtain a mortgage. If they are unable to get the necessary financing, they can back out of the deal without penalty.
Common Contingencies in Real Estate Transactions
Several common contingencies are frequently included in real estate purchase agreements:
Home Inspection Contingency
This contingency grants the buyer the right to have a professional home inspector assess the property’s condition. If the inspection reveals significant issues, the buyer can renegotiate the purchase price, request repairs, or even cancel the agreement, depending on the specific wording of the contract.
Appraisal Contingency
The appraisal contingency allows the buyer (or their lender) to obtain a professional appraisal of the property to determine its fair market value. If the appraisal comes in lower than the agreed-upon purchase price, the buyer can cancel the deal, renegotiate the price, or proceed with the purchase, potentially needing to cover the appraisal gap with their own funds. Lenders use appraisals to ensure they’re not lending more than the property is worth.
Financing Contingency
This contingency gives the buyer a specific timeframe to secure the necessary financing to complete the purchase. If the buyer is unable to obtain loan approval within this period, they can withdraw from the agreement and reclaim their earnest money deposit.
Title Contingency
The title contingency allows the buyer to ensure that the property’s title is clear of any liens, encumbrances, or ownership disputes. If any issues arise with the title, the buyer can cancel the purchase agreement. For instance, outstanding legal claims can prevent the deal from closing.
Home Sale Contingency
In situations where the buyer needs to sell their existing home to finance the new purchase, a home sale contingency can be included. This contingency allows the buyer to cancel the purchase agreement if they are unable to sell their current home within a specified timeframe.
Understanding Contingent Listing Statuses
Contingent listings can have varying statuses, providing further insight into the status of the deal:
Continue to Show (CTS)
Also known as CCS (Contingent – Continue Showing), this status signifies that the seller is still actively marketing the property and considering backup offers. This might indicate uncertainty about the current contract’s likelihood of closing successfully.
No Show
A “no show” status indicates that the seller is no longer entertaining additional showings or offers, suggesting confidence in the current deal progressing smoothly.
Kick-Out Clause
This clause allows the seller to continue marketing the property and accept another offer, even while under contract with the first buyer. The first buyer then has a specified period to remove their contingencies and proceed with the purchase; otherwise, the seller can accept the new offer.
What Does Pending Mean in Real Estate?
In the context of “contingent vs. pending,” a “pending” status signifies that all contingencies have been successfully resolved, and the transaction is expected to proceed to closing. Generally, “pending” indicates that something is awaiting completion.
Different Types of Pending Statuses
Here are some pending statuses you might encounter:
Taking Backups
This status means the sellers are still open to considering backup offers, even though they are in the pending stage.
Short Sale Pending
A “short sale” occurs when a homeowner sells their property for less than the outstanding mortgage balance, requiring lender approval. The listing might be marked as “pending – short sale” while awaiting this approval.
No Show
Similar to the contingent status, “no show” in pending means the seller isn’t allowing further showings or offers.
More Than 4 Months
This indicates the property has been listed as pending for over four months, which could be due to delays or an oversight in updating the status after the sale closed.
Contingent vs. Pending: Frequently Asked Questions
Does Pending Mean Sold?
Not necessarily. “Pending” means there’s a signed contract, but the sale isn’t final until closing.
Can a Seller Back Out of a Contingent Offer?
Potentially, depending on the purchase agreement terms. If the buyer fails to meet a contingency deadline, the seller might be able to cancel.
Can You Make an Offer On a House That Is Pending or Contingent?
Yes, you can make an offer, but its consideration depends on the progress of the existing deal.
Is It Worth Looking at a House That Is Contingent?
Potentially. If the current buyer struggles to fulfill contingencies, the seller might consider backup offers. A real estate agent can provide insights to aid your decision.
The Bottom Line: Contingent vs. Pending
Both “contingent” and “pending” indicate an accepted offer and a contract in place. “Contingent” means conditions must still be met, while “pending” suggests those conditions have been satisfied, and the deal is moving towards closing. As a buyer, you can make backup offers on properties under contract, potentially stepping in if the original buyer can’t finalize the purchase.
