Here’s What You Need To Know About Contingent vs. Pending

By: ROS Team May 3, 2021

Share the Post:

House hunting requires significant insight into the real estate market. While you may have started your search without much knowledge about it, you’ll definitely know more real estate terms and processes once it’s all said and done.

For example, you might have seen the terms “contingent” or “pending” as you reviewed real estate listings or conducted online searches, but what do those terms mean? We’ve put together a guide that explains what these terms mean so you can differentiate between the two.

Contingencies

If the term “contingent” or “contingency” appears on the real estate listing, there are certain conditions that the buyer must meet before the purchase can be finalized. If those conditions are not met, either the buyer or seller can back out of the agreement without penalty.

There are four common types of contingencies: mortgage, appraisal, inspection, and title.  Let’s look at each more closely.

• Mortgage Contingency

This contingency goes into effect when a buyer is unable to secure financing from a lender. When this happens, the seller can decide to not go through with selling the property to the buyer without any type of contractual penalty. The buyer stands to benefit from a mortgage contingency as well since they won’t be held accountable if a deal falls through due to loan denial.

• Appraisal Contingency

An appraisal contingency is the most crucial contingency of all. With this type of contingency, the bank gets the property appraised before approving the home loan. If the appraised amount is less than the property’s sale price, the bank may refuse to approve the loan. This contingency type also benefits buyers since it safeguards them from paying more than the fair market value. Buyers can also use the appraisal contingency to negotiate a lower price on the property.

• Inspection Contingency

The inspection contingency is when a buyer bases their purchase on the outcome of the property inspection. A buyer has the house inspected and may request structural or cosmetic improvements be complete before agreeing to proceed with the sale.

If the seller fails to make the improvements in the timeframe stipulated in the agreement, the buyer may withdraw from the deal without facing any financial penalty. The buyer may also use the uncompleted work to negotiate a lower sales price.

• Title Contingency

Title contingencies state that the real estate transaction may fall through if the property’s title isn’t free of liens, debts, or if there’s any indication that the property is owned by someone other than the seller.

Buying a property without title contingency is a considerable risk, and a real estate attorney always recommends including this clause in the agreement.

Pending

In real estate, the term “pending” means that all contingencies in the agreement are either fulfilled or have been waived.  The deal will close pending the completion of all paperwork and the documents are signed.

Pending agreements present their own unique circumstances. For instance, a seller may have accepted an offer but is unable to meet a buyer’s contingency requirement at the last minute. The seller may then begin accepting new offers as a result.

It’s also possible to have a pending deal fall through when a seller accepts an offer for a short sale. But the lender refuses to endorse the landlord’s decision or the bank takes longer than expected to approve the transaction.   A pending sale may also fall through if it’s been in a pending status for more than 4 months.

What You Can Do

Even though pending and contingent terms appear towards the latter phase of a real estate transaction. There is still a possibility that the deal can fall through.  What that means for you is you can still make an offer for a property that’s listed as “pending” or “contingent.”

This is called a backup offer because it gives the seller something to fall back in case the current deal falls through.

Sellers often will still welcome backup offers if the deal is at an earlier stage of contingency. So be proactive when making an offer. Consider waiving all contingencies, offering higher more money, or buying with cash if you can.

Final Thoughts

If your dream home is listed as “pending” or “contingent,” don’t lose hope. Consider making an offer anyway since. There’s still a chance the buyer will entertain it if the current deal falls through.  To make your home search easier, consider using NY Rent Own Sell.  Subscribe to our newsletter to get regular updates on properties of interest