When you start to do a little research into real estate, regardless if you intend to buy or sell, the process can quickly get confusing when you encounter all of the industry-specific terms bandied around. Then, when you finally start to think you understand enough, you come across the same house listed as pending and contingent on different websites. At that point, it’s natural to ask: What does pending mean? What is contingent? What’s the difference?
Understanding these real estate terms is important as they define the status of the property in question. However, there’s an additional catch – these are not legal terms, which means that realtors and listing agents don’t have to use the exact same terms when listing a property. Thus, you may come across different variations of the same concept.
In this article, we’ll cover what each of these terms means, the variations, and what the differences are, so that you can fully understand the situation. Once you know what real estate professionals want to convey when using these expressions, slightly different words or phrasing won’t trip you up and you’ll know what the status of a property is and everything that entails.
Let’s start with the basics. If you are selling a house and you accept an offer from a buyer through a real estate agent, the house will be listed as pending on MLS. This means that you and the buyers have agreed on the price, the terms and conditions, and have executed the contract, so your house isn’t active on the market anymore. However, the house hasn’t been sold yet.
Thus, pending in real estate means that a seller has accepted a buyer’s offer on a property, but the property hasn’t been sold yet; however, the property is no longer active on the market. Now, the buyer needs to find the finances required to actually buy the property. Until such a point as the sale actually goes through, the property will be listed as pending.
Usually, yes, you can take more offers in case the initially agreed upon sale does not go through. This is called a backup offer. However, this does not mean that you can reject the first offer if the second one ends up being better unless the contract you signed has a provision allowing you to do so. The backup offer only comes into play if the conditions of the contract you signed with the first buyer aren’t met and the sale falls through.
As we’ve stated, pending is not the only term used to refer to the same status of a property, so there are multiple phrases meaning the same thing or something very similar. For one, ‘under contract’ is a common synonym for pending – it also means that the seller and buyer have signed a contract. Some other variations are:
Pending/Under Contract – taking backups: the seller is still taking backup offers (but possibly not showing).
Pending/Under Contract – no show: the seller is no longer showing or accepting offers.
Pending/Under Contract – continuing to show: the buyer is still showing and accepting offers.
Sometimes, you may find that your property is listed as pending on one website and contingent on others. That’s because some listing agents use these terms interchangeably. However, contingent usually means that a seller is under contract with a buyer, but the offer is dependant on certain criteria being met.
In essence, contingent turns into pending when the specific terms of the contract are met. Thus, there is a higher chance of a deal on a house falling through if it is listed as contingent than one regarding a house that is listed as pending. Once again, there are different variations of contingent, so we’ll list the most common ones.
The variations are based on what you and your potential buyer agreed to in the contract, i.e. what the deal is contingent on, with the most common ones being:
Appraisal Contingency: Lenders usually require a home appraisal to be conducted before they give out a loan. Often, a home needs to appraise for equal to or higher than the buyer’s offer, otherwise, the lender may not issue a loan and the buyer can back out.
Inspection Contingency: The inspection contingency entails that a buyer can get a professional home inspection performed. Based on the terms of the contract and depending on the results of the inspection, the buyer may back out or the seller may be obligated to make repairs to keep the contract valid.
Financing contingency: This is a standard contingency in a contract that specifies that the contract is contingent on the buyer securing the appropriate loan. If the buyer is unable to secure financing, they may back out of the contract.
Home Sale Contingency: This contingency is somewhat similar to the financing one, except the sale going through does not depend on a loan being approved, but the buyer selling their own house to finance the purchase. This contingency is not infrequent, as many buyers need the proceeds from selling their own property before buying a new one.
Title Contingency: With a title contingency, a title company acquires all public records and other information pertinent to the property being sold. It is used to confirm the owners, that there are no debts, that the deed is legal, etc.
While it is doesn’t happen often, a ‘pending’ or ‘contingent’ status isn’t a guarantee that your home will sell, so here are some common reasons why deals fall through:
Financing issues: Whether it’s due to a financing contingency, a home sale contingency in the contract, or the buyer simply not being able to come up with the money for any other reasons, this is the most common cause of homes not selling after a contract has been signed.
Issues with the title: Sometimes, legal issues regarding the property can make a contract void. For instance, there may be legal complications regarding the heirs of an inherited home. Or, there could be mistakes in the public records, delaying the sale.
The home appraisal is too low: In a hot real estate market (as it currently is), potential buyers may bid over a home, raising its price. However, an appraisal may determine that the fair market value is much lower than what the final buyer offered. Consequently, the lender may refuse to issue the loan or the buyer would need to make up the difference out of pocket.
Cold feet: Finally, a buyer may simply back out of a deal, even after signing a contract, because they get scared. Buying a home is one of the largest purchases most people will ever make, so it stands to reasons that some will second guess their decisions and back out at the last second (even if it means they will lose some money).
If you don’t want to take the risk of a buyer backing out of a contract now that you know all of the reasons why they could, contact SleeveUp Homes and request a cash offer. We pay in cash and do our own repairs, so if we make a deal, you can rest assured that we will follow through. And because we cut out any middlemen, we can offer you the highest price possible for your home.
If you want to sell fast and are worried about how long the traditional process takes, and the commission and fees involved, consider working with SleeveUp Homes.