You found your dream home. It’s perfect! It’s the right size, in a great location, has the perfect yard — everything! Except…the listing says pending. Are you too late? Have you missed the home of your dreams?
Maybe. But maybe not.
Real estate deals fall through all the time, so it’s not really done until it’s done.
There are a few different statuses you may see when browsing real estate listings. In this article, we’ll compare pending vs contingent, find out what each one means, and whether buyers can still make an offer.
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What Is a Real Estate Contingency?
When a property goes under contract, both the buyer and the seller are promising that they will go through with the sale. For example, once a home is under contract, the seller cannot accept another offer and begin another contract with another buyer, even though the home hasn’t yet sold.
Conversely, a buyer puts down earnest money to show their seriousness about buying the home. If they walk away for no reason, they forfeit that earnest money.
But what if something comes up during the closing process that makes one of the parties not want to continue?
For this reason, both the buyer and the seller can add contingencies to the real estate contract. A contingency means that the sale of the property is contingent upon a certain condition. If that condition is not fulfilled, the party is no longer obligated to go through with the sale.
There are a number of common contingencies that appear in many real estate contracts. Let’s look at a few.
Home Inspection Contingency
Buyers don’t often have time to request an inspection before submitting their offer. What if the home inspection finds some major problems with the house? Sometimes they can negotiate repairs or repair credits with the seller, but other times they may not want to go through with the sale.
By making the sale contingent upon the inspection, they can back out if major problems are found. The best part for the buyer is that they walk away with their earnest money.
The appraisal is always a nerve-wracking part of the real estate process.
The buyer’s lender requests an appraisal to determine that the home is really worth the amount they are lending to buy it. They want to ensure that if the buyer defaults and they have to take possession of it, they can recoup their investment by selling it.
The appraisal is based on the intrinsic value of the home, not the market value. Sometimes, particularly in hot markets, sale prices can go up artificially but the appraisal won’t. The lender will deny a loan for a house that doesn’t appraise for a high enough value.
This can also happen when a buyer puts down a very small downpayment as the home has to meet the loan-to-value ratio.
An appraisal contingency again allows the buyer to walk away without losing their earnest money.
Buyer Financing Contingency
Financing contingencies also protect the buyer. The appraisal is a big part of securing financing, but there are many other reasons that the lender may deny their loan.
If the lender denies the buyer’s loan for any reason, the buyer financing contingency lets them out of the contract with their earnest money.
Previous Home Sale Contingency
Sometimes buyers will make the purchase of this home contingent upon the closing of their previous home. Closing usually takes 30-45 days and they may need the money from that sale in order to pay the down payment for the purchase.
This is a risky contingency for sellers and thus not commonly seen. If they have a choice, sellers will pass over offers including this contingency.
The status of a listing changes to pending once all the contingencies have been met. Typically, once they’ve reached the pending stage, listings are not considered active. The sale hasn’t quite yet closed, but it is expected too.
However, that doesn’t necessarily mean that buyers can’t make offers.
Pending — Taking Backups
This status means that the seller is still entertaining offers in case the current one falls through. Keep in mind they can’t accept anything until the current one actually falls through, so buyers may wait a while to hear back.
A short sale happens when a house is being sold for less than the seller owes to their lender. Sellers can accept an offer, but it has to be approved by their lender before the deal can go through.
Lenders are slow to respond. Short sales can end up pending for months before anything actually happens. If buyers have time to wait, they can place a backup offers on the house. Again, they could be waiting for months to hear.
Real Estate Terms Explained: Pending vs Contingent
There you have it! The difference between pending vs contingent in a listing status. We hope that these real estate statuses are a little less confusing when you see them in the future.
When you’re looking to buy a home, don’t be afraid to put down an offer just because one of these terms is listed in the status. Contingencies can be difficult to fulfill and real estate deals fall through all the time. Thus, there’s no reason not to try even if the home is already under contract.
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