One of the questions I often field as a real estate agent from buyers and sellers is the difference between a pending home sale and a contingent home sale.
Some will also ask what a contingency means as well.
The meaning of contingent is not difficult to understand and neither is pending However, if you are not buying or selling real estate daily, there is quite a bit of lingo that can make you wonder.
When you start looking real estate listings, you will come across properties in different statuses – contingent and pending. Home buyers quickly realize these status types they have differing meanings.
Real estate sales can be complicated – which means there are many ways that transactions can hit a snag, slow down, or fall through altogether.
Knowing what terms like contingent and pending mean can be helpful since you will probably see them repeatedly while navigating the buying and selling process.
Understanding their meanings is essential, especially if you are selling your home.
In fact, as a homeowner, you should have some say in how your real estate “marks” your transaction after you accept an offer.
What is vital to know is that both the pending and contingent status means an offer on the property has been accepted.
Real Estate agents refer to this as a home going under contract.
Once a contract has been executed, one of the things the listing agent must do is choose the appropriate status in the Multiple Listing Service.
It’s important to note that real estate agents must follow specific rules set aside by their local multiple listing service (MLS), including how quickly the status of a property is changed.
Quite often, it is twenty-four hours. The contingency clauses typically play a significant role in what choices the agent makes. For example, if the buyer is not getting a loan, they may move the status to pending and forgo being contingent.
Agents do this because if home buyers don’t need a home loan there is little worry the sale will fall through.
Let’s examine the difference between contingent and pending.
What Does Contingent Mean?
The meaning of contingent escapes many buyers and sellers. Many buyers and sellers will ask a real estate agent what it means. It makes sense since they always see it when looking at properties online.
In a real estate deal, it means a sale will only go through if certain conditions are met. The seller has accepted an offer from a buyer, but there are stipulations that either the buyer or the seller has added to the contract as requirements for the final sale to be approved.
That means conditional sales are still considered active – because contingencies are often unmet, leading to the home purchase falling apart.
The deal will move into pending status if the contingencies are met. The meaning of conditional can confuse folks because it can be treated differently from one state to another.
Common Contingencies in a Real Estate Contract
These are the contingencies found in real estate contracts that keep a property in conditional status.
Home Inspection Contingency
A home inspection contingency is the most common in a real estate contract.
Suppose the home inspection reveals significant issues, like foundation, roof, plumbing, electrical, etc. In that case, there are a few options. The buyer can request that those issues be fixed or lower the price.
The buyer can walk away if they do not address the needed repairs or reduce the purchase price. A home sale falling apart is not uncommon, especially when the property is considered a fixer-upper.
Additional Specialty Inspections
There are other potential inspections the buyer may request, including radon testing, well water testing, checking for mold, and testing for the presence of lead paint.
These are considered more specialized inspections that will be completed during the buyer’s due diligence period.
A buyer could back out of the sale if these tests do not deliver the desired results.
Appraisal Contingency
The appraisal process must indicate that the property is valued high enough to justify the offer. At times, buyer’s agents put appraisal contingencies to ensure their clients are not overpaying for a property.
If the appraiser does not value the home at a price that matches the offer, the buyer can request a lower price or leave the deal. There is an appraisal gap when the appraised value does not match the contract price.
Sometimes, there are appraisal disputes if the appraiser makes valuation mistakes. The housing market will determine whether this contingency clause is used. Removing the clause is something to consider in a strong seller’s market where bidding wars are common.
Mortgage Financing Contingency
The mortgage contingency is routinely found in real estate contracts. Most buyers cannot make a cash offer and need mortgages to finance the property. Getting loans from banks is a major step in the home buying process.
If the buyer cannot get the money necessary to purchase the home, as the mortgage falls through, the seller can opt out of the sale.
Checking on the buyer’s financial qualifications is one of the essential parts of a real estate transaction. Checking on the buyer’s credit, debt, and overall financial status is a vital task for a Realtor. This research can give seller peace of mind the buyer has the criteria necessary to satisfy the bank.
Title Contingency
When you’re buying a home, the mortgage lender will require a title search to be completed. A real estate attorney or a title company will perform a title search.
The buyer can leave the deal if the title search reveals the property’s ownership status is in doubt. Real Estate attorneys always encourage buyers to purchase title insurance. Doing so is well worth the expenditure.
Home Sale Contingency
The buyer can ask the seller to take the home off the market for a specific period so the buyer can sell their current home.
The seller will put the house back on the market if they do not sell their existing home by the set period. A home sale contingency is often not accepted because it leads to frustration and failure for sellers.
When you allow a home sale clause, you lose all control of the process. How do you know the buyer will price their home correctly? You don’t!
Right of First Refusal
Another standard home sale status in MLS is a right of first refusal. The first right of refusal comes into play if a seller gets another offer. While in this status, the first buyer can proceed with the transaction.
The period in which the seller must act is generally twenty-four to forty-eight hours. In some MLS boards, a right of first refusal may be referred to as a kick-out clause.
So when someone asks, “What does a contingency mean in real estate,” these are the ones you will most commonly see in a home sale.
So, a home will often stay in this status until these contingencies are satisfied. All of these clauses protect the needs of the buyer so they don’t lose their earnest money deposit. Each one allows the buyer the opportunity to escape the sale.
What Does Pending Mean?
Realtors are asked all the time what pending in real estate means. A pending sale means that all of the contingencies have been met.
Real Estate agents will move properties that have been contingent to pending when the contingencies will no longer hinge on a successful closing.
Once a deal reaches a pending status, it no longer remains active. The property will remain pending until the handling of all the legal paperwork and the closing of the sale.
It is essential to note that there are no legal requirements for putting a home into pending status. If a real estate agent were confident the sale would close, they could move the deal to pending status without completing all the open contingencies.
If the contract contained no contingencies, the property could be immediately put into pending status.
Critical Differences Between Contingent vs. Pending Status
1. In real estate, “pending” and “contingent” are both statuses used to indicate the progress of a transaction.
2. A pending status means that all contingencies have been met or waived, and the sale is moving toward closing.
3. On the other hand, a contingent status means that unresolved contingencies still need to be fulfilled for the sale to proceed.
4. Common contingencies include home inspections, financing approval, and appraisal values meeting the agreed-upon price.
5. When a property is listed as pending, it typically means it is under contract and no longer available for showings or accepting offers.
6. Sometimes, a pending status can still be subject to potential issues like buyer financing falling through or appraisal discrepancies.
7. Once a transaction moves from contingent to pending, it suggests that the deal is closer to being finalized.
8. Real estate agents often use these statuses to inform buyers and sellers about the current stage of a transaction.
9. It’s important for both buyers and sellers to stay updated on the status of their transactions to anticipate any potential delays or obstacles.
10. Different regions may have slight variations in terminology or definitions for pending and contingent statuses, so it’s always best to consult a local real estate professional for accurate information.
Is a Property Contingent or Pending First?
A home is always contingent first before moving to contingent status.
Active Under Contract vs. Pending
Another term you may hear is active under contract. In many MLS systems, there is what’s referred to as an active listing that is under contract.
Active under contract means the same thing as contingent. The home remains “active” in the MLS despite accepting an offer.
A real estate agent may do this after an offer has just been accepted. They may fear the contract is not completely solid, and there is doubt whether the sale will stay together.
By keeping the home active under contract status vs. pending, many websites, including some of the most visited by buyers, will still show the house as available.
The downside to doing this is consumers see homes online they think are available to purchase but aren’t. The contract with the buyer would need to fall apart for another buyer to step in and purchase.
Active Kick Out vs. Active Contingent
Not to confuse you, but another potential status comparison is active kick-out vs. active contingent. These two listing statuses are very different. A home is actively marketed online as an active listing during an active kick-out.
However, there is an agreement with a buyer that would allow them first right to purchase if another buyer came along.
In this scenario, the property owner must allow buyer #1 to proceed with the transaction. If buyer #1 chooses not to move forward, buyer #2 can.
Buyer #1 could choose to purchase, and Buyer #2 would be out of luck.
As mentioned, active contingent means a buyer is in place doing their due diligence on the property and trying to fill other contingencies they may have in their contract.
Once those contingencies are met, the status is changed to pending.
Days on Market Differences Between Contingent and Pending
The difference for buyers and sellers can be significant. There are certainly pros and cons with pending vs. contingent.
As a home seller, there is a significant reason you may want to have your real estate agent mark your property pending rather than contingent.
The reason is the days on the market!
When you choose pending, the days on the market stop at the number of days it’s been for sale.
When you pick contingent, it doesn’t.
The days on the market continue to rise as if the home was still available. The only problem is it’s not!
Conversely, when you mark the property as pending, it falls out of all the popular home-selling portals such as Zillow, Realtor.com, and Trulia.
This is the only downside. I say, so what?
What you need to remember is that you have accepted a contract. If someone sees the property online, they can’t buy it, and you can’t sell it to them.
Real Estate agents know you have accepted a contract.
Do you think an agent wants to waste their time showing a home that is highly unlikely to come back on the market? Hell NO!
So, even if you mark your home as conditional, the chances of getting showings are slim.
If the sale falls apart in pending status, your days on the market will have stopped. It won’t be an inflated number.
Any real estate agent will tell you that significant days on the market have a negative connotation!
Pending Statuses in The Multiple Listing Service
The Multiple listing services around the country include the following unresolved status:
Taking Backups
Another listing status in the multiple listing service (MLS) is accepting backup offers. The seller has accepted an offer on the home, but the deal has potential issues.
There may have been a problem with a contingency or some other type of problem, like the buyer having trouble getting financing. When the seller worries about the deal, they may accept backup offers.
If they eventually find that their current agreement will not work out, sellers will start looking at the backup offers they have received.
However, if a better offer comes, the seller cannot back out of the current deal. The current agreement must fall through on its own before the seller can consider the new proposals.
Short Sale
A short sale is when the lender accepts less money than what they are owed for the property. Short sales are notoriously slow because the seller’s lender has to approve the deal, adding months to the standard transaction time frame.
The bank accepts a short sale to avoid foreclosure, meaning the home sells for less than it is worth. However, the bank is not going to take just any offer.
Before handing the home to the buyer, the lender wants to be confident that everything is to its liking.
Many short sale deals fall through, so you may find that the unconcluded status goes away eventually, and you can make an offer on the home.
Unsettled Extended For Months
Properties in this status for more than four or five months is highly unusual unless it is new construction. There are many reasons a deal can stall and lead to a long delay, such as problems with negotiations, issues with completing construction, and processing times that take longer than expected.
However, there is also the possibility that the agent forgot to update the listing status. Having your agent check on the listing is worth it to verify if it is still unsettled and not sold or now available for you to make an offer.
Contingent Versus Pending on Realtor.Com
When a home is in conditional status, it will still appear as a home for sale on many websites, including Realtor.com. When a property is pending, it no longer appears on Realtor.com and others as being for sale.
Strategies to Get a Home You Want
Here are a few ways to ensure you get the home that you want:
Act Quickly
If you see a home that interests you, view it immediately and make an offer as soon as you and your Realtor decide on a reasonable price.
You can often avoid offering on houses with a home buyer already by just by getting out there and focusing on fully available homes.
Use an Agent You Trust to Communicate with Sellers and Agents
It is hard to know whether to make an offer on one of these listings until you get the information you need – which is where an excellent Realtor comes in handy.
Your agent can communicate with the other agent to determine what is happening with the deal and whether you should bother making an offer.
Making an Offer Without Contingencies
Sellers love offers without contingencies because they know the deal will likely go through. However, only make such an offer if your agent agrees it is a good idea.
In hot real estate markets, it is not unusual for many standard contingencies to be waived. This is often how a buyer will win a bidding war on a house.
Writing the seller a personal letter can sometimes be a helpful way to land the house.
Interesting Statistics
FAQs
What Factors Play Into Cases Where One Status or Another Should Be Chosen?
On the other hand, a sale is considered contingent when certain conditions must be met before the transaction can be finalized. These conditions could include obtaining financing approval, satisfactory home inspections, or resolving any legal or title issues such as liens.
Until these contingencies are satisfied or waived by either party, the sale remains conditional.
When all parties involved have reached an agreement on the terms and conditions of the transaction, including the purchase price, contingencies, and closing date, they consider the home sale sale almost resolved.
Can You Make an Offer on these Listing Types?
You may want to buy one these houses. The truth is, you can make an offer on any listing that has not reached sold status.
Of course, depending on the circumstances, you may be wasting your time. Some statuses are more favorable for offers than others.
The best time to make an offer is when the home is not in one of these statuses, However, if you want to make an offer on a home that is not fully available, aim making a backup offer.
Some sellers are actively seeking more offers because they fear the current deal they are involved in may collapse.
If a buyer does opt out – and they very well may – then your offer will be there for the seller’s consideration.
What Should Buyers Consider Before Making an Offer on a Property With Conditions?
Buyers should consider several key factors before proceeding. They should carefully review the terms and conditions of the exiting buyer’s contingency, ensuring that it aligns with their specific needs and timeline.
Additionally, buyers should conduct thorough due diligence on the contingent event itself, such as the sale of the buyer’s own property or the completion of necessary repairs.
It is crucial for buyers to assess the likelihood of the contingency being met within a reasonable timeframe.
Furthermore, buyers should also evaluate the potential risks involved in entering into a contract with contingencies, such as the possibility of losing out on other desirable properties during the contingency period.
By considering these aspects, buyers can make informed decisions when making an offer on a conditional property.
How Often Do Conditional Offers Fall Through?
These offer falls through less than five percent of the time.
The common reasons for a home sale falling apart are problems with the home inspection or real estate appraisal.
Does Contingent Mean You Can Still Make an Offer?
Yes, you can still make an offer. However, the request will be a backup. The seller cannot accept the offer unless the first contract falls through.
Can a Seller Back Out of a Conditional Contract?
No. A real estate contract is a legal and binding document. A seller cannot back out of a contract unless a buyer does not fulfill their legal obligations.
Why Do Houses Stay Conditional For So Long?
A house could remain conditional for an extended period if the buyer has difficulty procuring financing. A real estate agent can keep the home in this status until all contingencies are satisfied.
How Long Does it Take to Go From Contingent to Pending?
The time for houses to change statuses can vary. You can expect this status change to be a couple of weeks on average.
What Happens When a Property Goes From Contingent to Pending?
When properties move to this status, it signifies a significant milestone in the home buying process. The buyer has met or waived all contingencies and conditions outlined in the purchase agreement at this stage.
Both parties have signed the necessary paperwork. The status indicates that the transaction is moving forward towards closing. During this period, the buyer finalizes any remaining details before the official transfer of homeownership takes place.
It is important to note that once a property reaches this status, it is no longer available for new offers or showings. The seller will be getting their proceeds soon and the buyer will be a proud homeowner.
Final Thoughts
Discuss whether you put your home pending or contingent with your real estate agent when selling a home. Remember that marking a home contingent in many locations increases your days on the market even though you’ve accepted a contract.
In most circumstances, you’ll be better off marking your sale pending. Hopefully, you now have a better understanding of the meaning of contingent vs. the meaning of pending.
About the Author: The above Real Estate information on the difference between pending vs. contingent was provided by Bill Gassett, a Nationally recognized leader in his field. Bill has expertise in mortgages, financing, moving, home improvement, and general real estate.
Learn more about Bill Gassett and the publications he has been featured in. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of Metrowest towns for the last 37+ years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
