Buying and selling a house is not exactly a straightforward process. From the moment you contact a seller up until the final signature, the listing will go through some steps. There are two listing states people stumble over: the contingent and pending status.
But what do these statuses mean? How far from closing the deal are you when the house of your dreams moves to one of these stages? After reading this article, you’ll know exactly what happens at each of these stages. Let’s dive in!
The Difference Between Contingent and Pending Real Estate
Understanding the contingent and pending states, as well as the distinctions between them, will assist you in identifying opportunities that others may overlook. The difference between the two lies in where the listing is placed in the selling process:
The Contingent State
In real estate, “contingent” means the seller has accepted your offer with conditions, or criteria, that must be satisfied before the transaction can close. If you cannot fulfill the stipulations, the seller can cancel the contract. Since this circumstance could reset your house sale, the contingent state is not the best state for you as a buyer. Multiple reasons can lead to a contingent state:
- Appraisal contingency: You don’t want to pay a property more than what it’s worth except when the market is hot. Mortgage lenders may demand an appraisal to make sure that the property isn’t overpriced. The appraisal contingency states that a property must be appraised at the sale price or higher for a deal to continue. You are allowed to ask for a lower price or to back out of the deal if the home appraises for less than the sale price.
- Home inspection: As a buyer, you may want a house inspection contingency, which gives you additional alternatives after the inspection. After the inspection report is provided, you have the option to simply terminate the contract if you are unable to adequately negotiate the fixes you need, or if the examination finds a bigger underlying issue that you are unwilling to deal with.
- Mortgage approval process: While your mortgage isn’t approved, the listing will remain contingent. If you cannot get the home loan or mortgage required, this contingency will either give you time to seek alternative financing choices or allow you to walk away from the contract entirely.
- Sale of buyer’s home: Although selling first makes sense in most instances, time and finance don’t always align. This clause helps you to make sure that you have time to sell and settle your current house before buying a new one. For example, if an existing house does not sell for the asking amount, the buyer may back out without legal repercussions. House sale contingencies may be problematic for the seller, who may have to reject another offer until the contingency is resolved. The seller may terminate the contract if your house doesn’t sell within a certain time frame.
- Legal contingencies: During the house purchasing process, an attorney or title firm will search the property’s title. The title is a record of ownership and is required for selling. Most title problems need to be addressed before closing. In certain cases, the seller may not be able to legally establish ownership of the property. A title contingency protects you by enabling you to walk away if problems are not addressed before closing.
So, the listing remains active while under the contingent status and the seller may still accept other offers. Once all contingencies are met, the property will move forward to the pending state.
The Contingent Statuses
While being under a contingent state, the listing can have different sub status, informing you of the remaining possibilities regarding this home. Here are three of the most common statuses:
CCS – Continue to Show
A listing with the status Contingent – Continue to Show, or CCS, indicates that the seller has chosen to acknowledge offers from other expected purchasers while maintaining the status quo.
Contingent – No Show
In a Contingent – No Show situation, the seller has chosen not to display the property any longer or to acknowledge any new offers, even though all contingencies have not been satisfied.
Short Sale Contingent
It is the point at which the vendor has demonstrated that they are willing to accept less money than the amount owed on the mortgage. It can take a long time to complete a short-deal transaction interaction.
In the home sale contingency period, a seller who accepts an offer with a kick-out clause has more leverage (the period during which the contingency must be met). Some sellers may use other contingencies, such as the financing contingency, to show that you are unable to purchase the property. The original contract will be voided, allowing the seller to negotiate with the higher bidder.
The Pending State
When a house is scheduled to close and all contingencies have been met or waived, its status is changed to “Pending”. At this point, you are very close to making the deal. All the contingencies are met and nothing is holding you from proceeding to the sale, except the remaining paperwork and legal work that may take some time to get done. But as the sale is not complete, the seller can still decide to accept backup offers.
The Pending Statuses
Once your property’s listing is in a pending state, it can have different sub statuses.
Pending – Taking Backups
This status indicates that the seller is still accepting backup offers for this property.
Pending Short Sale
When an offer that’s accepted is defined as a short sale, the property is going through the last steps of the process with the mortgage holder. With the Pending Short Sale status, the seller may not receive new offers and the listing is no longer active.
Pending, Release/Continue to Show:
The seller accepted your offer, and contingencies have been met. But a “kick-out clause” remains for you or the seller. The seller can still show and accept offers.
Pending – More Than 4 Months
When an accepted offer has been on hold for more than four months, the MLS applies this status automatically. This could be a sign that something about the sale transaction is taking longer than expected. It may also be that the listing agent forgot to change the status from Pending to Sold after closing.
Can I Buy a Contingent Property?
It’s not too late to make an offer on a contingent listing. The property might have acquired this status because the buyer does not meet all requirements. This could be your chance to make a stronger offer and take the first place. If your offer is compelling, the seller’s agent will want to speak with you. A quick conversation between the professionals will probably reveal the deal’s viability. Remember that sellers who accept a contingent offer without a “kick-out clause” may not be able to back out.
Can I Buy a Pending Property?
The short answer is yes, as pending does not mean sold. As we’ve seen above, at this point the seller may still accept backup offers. So if this house seems to be the one, it’s worth making an offer. Yet, your offer needs to be rock solid. The seller at this stage is unlikely to be willing to take risks by accepting offers with too many contingencies. Therefore, make sure you are financially strong enough to close the deal.
How To Place An Offer on a Pending or Contingent Property?
The best way of doing it is to contact your real estate agent. Then, make sure you follow our tips to put all the chances on your side
- Be strong financially. Present a complete offer, including mortgage pre-approval and proof of funds. Offer more than the asking price if you can.
- Show flexibility. Demonstrate that you are not in a rush. Don’t make every comma in the contract mandatory. Allow the vendors additional time to pack their belongings, for example. This has the potential to have a significant influence.
- Send a letter. The good old letter can make the difference and pique the sellers’ interest.
- Remain available. You want the seller to be aware that you’re ready to move as soon as they are. Keep in touch with your agent regularly to ensure that you remain on their radar if anything changes.
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