Difference Between Contingent and Pending Status
One of the questions I often field as a real estate agent from both buyers and sellers is what’s the difference between a pending home sale and a contingent home sale.
When you start looking at homes to buy, you will come across properties in different statuses – like contingent and pending – as sellers field offers, and everyone tries to move along through the sales process.
Real estate sales can be complicated – which means there are many ways that transactions can hit a snag, slow down, or fall through altogether. It can be helpful to know what terms like contingent and pending mean since you are probably going to see them repeatedly as you navigate 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. Once a contract has been executed, the listing agent has to choose a status in the Multiple Listing Service – either pending or contingent.
It’s important to note that real estate agents are required to follow specific rules set aside by their local multiple listing service, including how quickly the status of a property is changed. Quite often, it is twenty-four hours.
Contingent and Pending – What You Need to Know
What does for mean?
In a real estate deal, contingent means that a sale is only going to go through if certain conditions are met. The seller has accepted an offer from a buyer, but there are conditions that either the buyer or the seller has put down as requirements for the final sale to be approved.
That means that contingent sales are still considered active – because contingencies are often not met, which leads to the deal falling apart.
If the contingencies are met, the deal will move forward into pending status.
Contingencies you may see include:
- Appraisal contingency. The appraisal process must indicate that the property is valued high enough to justify the offer. Buyer’s agents, at times, put appraisal contingencies in to ensure that their clients are not overpaying for a property. If the home is not appraised for a value that matches the offer, then the buyer can request a lower price or walk away from the deal. Sometimes their end up being appraisal disputes if the appraiser clearly made valuation mistakes.
- Home inspection contingency. If the home inspection reveals significant issues, like foundation problems, roof issues, plumbing issues, electrical deficiencies, and so on, the buyer can request that those issues are fixed or the price be lowered. If the problems are not fixed or the price reduced, the buyer can walk away. A home sale falling apart is not uncommon, especially when the property is considered a fixer-upper.
- Additional inspection clauses: 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.
- Financial contingency. If the buyer is unable to get the money necessary to purchase the home like if 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.
- Title contingency. If the title search reveals that the ownership status of the property is in doubt, the buyer can walk away from the deal. 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 of the market for a specific period so that the buyer can sell their current home. If their existing home is not sold by the set period, the seller will put the house back on the market. 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 common home sale status you will see in MLS is what’s referred to as a right of first refusal. The way the first right of refusal works is if a seller gets another offer while in this status, the first buyer has the opportunity to move forward 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.
What does pending mean?
In some areas of the country, a pending sale means the exact same thing as a contingent sale. All of the above contingencies mentioned could be part of the sale that must take place for a closing to occur.
On the other hand, there are places where a sale that is pending is one where the seller has accepted an offer from a buyer, and all the contingencies for that sale have been met or waived by one or both parties.
Once a deal has reached pending status, it is no longer considered active. The property will continue to be in pending status until all the legal paperwork has been taken care of, and the sale closes.
Pros and Cons of Whether You Choose Pending or Contingent?
As a home seller, there is a very significant reason why you should almost always 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 stops 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 to purchase. The only problem is it’s not!
On the flip side, 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 in contingent status, the chances of getting showings are slim. In the event 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 has a negative connotation!
The difference between pending and contingent status is significant when you take this into account.
Pending statuses you may see include:
- Pending – taking backups. Another listing status you may see in the multiple listing service (MLS) is accepting backup offers. The seller has accepted an offer on the home, but there are potential issues with the deal. 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 is worried about the deal, they may accept taking backup offers. If they eventually find that the current agreement they have is not going to work out, sellers will start looking at the backup offers that they have received. The seller cannot just back out of the current deal if a better offer comes through, however. The current agreement has to fall through on its own before the seller can start considering the new proposals.
- Pending – a 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, which can add months to the time frame of the standard transaction. The bank is accepting a short sale to avoid foreclosure on the property – which means the home is selling for less than it is worth. However, the bank is not going to take just any offer. It wants to be confident that everything is to its liking before handing the home over to the buyer. Many short sale deals fall through, so you may find that the pending status goes away eventually, and you can make an offer on the home.
- Pending – extended for many months. A home being pending for more than four or five months is highly unusual unless it is new construction. There are many reasons why 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 status of the listing. It is worth having your agent check on the listing to verify that it is still pending and not sold or now available for you to make an offer.
Contingent and Pending Listings – Can You Make an Offer?
You may really want to buy a home that is currently listed as contingent or pending. The truth is, you can make an offer on any listing that has not reached sold status.
Of course, you may be wasting your time, depending on the circumstances. Some statuses are more favorable for offers than others.
Obviously, the best time to make an offer is when the home is not contingent or pending, but if you do want to make an offer on a home that is not fully available, aim for those that are pending and taking backup offers.
These sellers are looking for more offers because they are worried that the current deal they are involved in is going to fall through. If it does fall through – and it very well may – then your offer will be there for the seller’s consideration.
Strategies to Get a Home You Want
Here are a few ways to ensure you get a home that you really want:
If you see a home that interests you, view it right away and make an offer as soon as you and your Realtor decide on a reasonable price. You can often avoid needing to make an offer on a contingent or pending home just be 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 a contingent or pending listing 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 find out precisely what is going on 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 is likely to go through. However, only make such an offer if your agent agrees that it is a good idea to do so. In hot real estate markets, it is not unusual for many standard contingencies to be waived. Quite often, this is 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. Including why you love the property along with a picture of you and your family can make a business transaction much more personal.
When selling a home, make sure you discuss with your real estate agent whether you put your home pending or contingent. Remember that in many locations marking a home contingent lets your days on the market continue to rise even though you’ve accepted a contract. In most circumstances, you’ll be better off marking your sale under agreement or pending.
Other Helpful Real Estate Articles
- Is an open house a waste of time – see why an open house is entirely unnecessary for sellers in the digital age. Open houses benefit real estate agents far more than homeowners.
- Selling a home to Ibuyer – have you heard the term “Ibuyer” and are wondering what it means? Take a look at the detailed summary of what you need to know about Ibuyers.
- What smart home amenities increase value – making your home “smart” is one of the latest rages in the housing industry. Take an in-depth look at what is hot in making a smart home.
These articles will help you make the best decisions possible when buying or selling real estate.
About the author: The above Real Estate information on pending vs. contingent home sales was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at [email protected] or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 33+ years.
Are you thinking of selling your home? I have a passion for Real Estate and love to share 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.