As you search for a home to buy, you’ll see that some homes have different statuses. Two of the most common and yet most confused are contingent and pending. Both statuses mean there is an offer on the home and it may be off the market soon. However, it’s not off the market quite yet.
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Understanding the different terms can help you determine if it’s worth pursuing the home or if you should look elsewhere.
A Contingent Status
If you find a home with a contingent status, it shouldn’t discourage you to walk away from it. Contingent status means the seller accepted an offer with contingencies. These contingencies could potentially make the sale fall through, which is why you shouldn’t give up on it.
Technically, the listing is still active. Sellers may or may not still be accepting bids. Legally, they are able to accept bids while their home is in this status. They are ‘back up’ offers should the current offer fall through. Typically, the seller can’t just ditch the current offer and take yours, but they can accept your offer as a backup.
Typically, contingent offers have one or more of the following buyer contingencies:
- Financing – The buyer has a specific amount of time to secure financing without conditions. If the buyer can’t secure the financing before the expiration of the contingency, they can back out of the contract without financial penalty.
- Appraisal – If the appraiser finds that the home is worth less than the buyer’s offer, the buyer can back out of the deal without penalty. This contingency also has an expiration date. If the appraisal isn’t completed in the allotted time, the appraisal contingency could expire, leaving the buyer liable for buying the home no matter the value.
- Inspection – If the inspector finds issues with the home, the buyer can request the seller to rectify the issue or the buyer can back out of the sale. The buyer must make all decisions before the contingency expires, though.
- Sale of home – If the buyer must sell their current home in order to have money to buy the seller’s home they may include a contingency. Just like the other contingencies, the contract must include specific expiration dates for the contingency.
The seller may also add a few contingencies of their own:
- Active-First Right – If the seller knows it’s a seller’s market and doesn’t want to give up the chance of a higher bid, they can include this contingency. It gives the seller the right to accept a higher bid on the home, but the current buyer gets the opportunity to meet that bid first.
- Active – Kick Out – If the current buyer of a home has his own home to sell, the seller may want to be able to accept other non-contingent bids on their home. The kick-out clause gives the seller the right to accept the new bid and ‘kick out’ the current contract holder assuming they did not yet sell their current home.
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A Pending Status
If a house is in pending status, there may be contingencies in the purchase contract, but the buyer either satisfied them or waived them. The home must remain in this status until the lender/escrow agent complete the closing.
Even in pending status, though, sellers may still be able to accept ‘back up offers.’
The pending status you want to look for is the ‘Pending – Taking Backups’ status. With this status, the seller is likely willing to take a backup offer due to the length of time it’s taking to close on the current contract. If there is an issue, the seller may be willing to accept offers with no contingencies should the current deal not make it.
You may see statuses of Pending- Short Sale or Pending – (More than 4 Months or any other amount of time). Any pending status that lasts for a long time could mean the seller is willing to take other offers. The exception to the rule is a short sale, though. Short sales take longer in almost every case, and the bank probably won’t allow the seller to accept another bid unless something is really going south with the current offer.
The bottom line is that if you are aggressive and diligent, you may still buy a home that has a contingent or pending status. The deal isn’t final until the ink dries on the closing papers. If you still have interest in a pending or contingent home, let your real estate agent know about your interest. You should also do as much legwork as you can to figure out why the sale isn’t closing so that you can figure out how to have the advantage and win the bid.