In casual conversation, people might use the words pending and contingent interchangeably when it comes to real estate. Both are statuses of a property’s availability, but they mean different things.
When a property switches to contingent, it means the seller has accepted an offer that is contingent on specific conditions requested by the buyer. That could involve anything from financing to an inspection.
When you see your dream home on the market switch to pending, that means the seller has accepted an offer and all contingencies have been addressed or waived.
The difference between these may be subtle, but the bottom line is, neither status means sold.
Contingent Offers vs. Pending Offers
What is a Contingent Offer?
When a home’s status switches to contingent, it means contingencies stand in the way before the deal is done. If closing on a home is a race, then buyers still have miles ahead of them when they enter the contingency process.
There are many types of contingencies buyers can include in their offer that make it easier for them to back out of a real estate deal, but these are some of the most common:
• Financing contingency. The buyers put some money or the promise of a mortgage behind their offer, right? This condition ensures that if the buyers aren’t approved for a mortgage, they’re not on the hook for finding cash to buy the property. In fact, 10% of home sale contracts fell through in February 2021 because of financing issues, according to the National Association of Realtors. Some buyers choose to have a preapproval letter in hand to make the financing contingency move faster.
• Inspection contingency. A home inspector will search the property top to bottom to uncover any issues. With a home inspection report in hand, buyers can ask the sellers to solve the issues or give them a credit against the purchase price of the home.
With this contingency, buyers can also walk away scot-free based on the findings of the inspection. Alternatively, if both parties don’t come to an agreement on repairs or credits, they can terminate the deal. Inspection issues caused 9% of real estate contracts to fall through in early 2021, according to NAR.
• Appraisal contingency. In order to secure financing for a home, it must be professionally appraised for the value of the offer or more. If the home is appraised for less than the offer, the buyer can either make up the difference in cash, negotiate with the seller for a lower offer, or walk away from the deal. The NAR survey showed that 11% of real estate deals were terminated because of a problem with the appraisal.
• Home sale contingency. If buyers need to sell their existing home to help finance the purchase of a new home, they may include a home sale contingency in the offer. That means if an offer on their home falls through, they’re no longer on the hook to buy the home they made an offer on.
Contingencies are in place to protect buyers and sellers in the event of snags throughout the negotiation process.
House hunters can include as many contingencies as they like in an offer, and if the sellers agree, the buyers will need to work through each one before they make it to closing.
For people salivating over a hot property that looks taken, contingencies may signal opportunities for a deal to fall through. If you have your heart set on a home that’s contingent, you can hold out hope. Thanks to contingencies, there’s a chance the existing offer will fall through.
What is a Pending Offer?
Just because a home is pending doesn’t mean the deal is done. A home often enters pending status once buyer contingencies are cleared, but it can also enter pending status immediately if a buyer makes an offer without contingencies.
A pending home sale may still fall through, but the buyer and seller have worked through most of the contingencies. For a pending sale to fall through, there likely has been an unexpected issue with the inspection or financing.
In fact, a pending home is still on the market. The listing agent and seller can choose to continue showing the home, and even accept other offers, even if its status is pending. However, this is largely up to the sellers and their agents.
Recommended: First Time Home Buyer Guide
Can Pending and Contingent Homes Take Other Offers?
If a home is contingent and the buyers are still working through the inspection, financing, or selling their current home, a competing buyer can make a backup offer on the property. If the initial offer falls through for any reason, the seller can take the other buyer up on their offer.
It’s up to the sellers whether they will accept a backup offer or not, but if the buyer loves the property, it can’t hurt to ask.
In many markets, a home with pending status means it’s not open to additional offers, but the deal isn’t sealed. It’s not over till it’s over, so the buyers could still back out based on their contingencies, as outlined above.
(A home could be marked “pending – taking backups,” indicating that the seller is still showing the house and accepting backup offers.)
When a home is pending or contingent, it’s not against the law for another buyer to ask for a tour, express interest in the home, or even make a competing offer. But compared with a home that is not under contract, it is less likely that a competing buyer will get the property.
It’s OK to make offers on these properties, but buyers shouldn’t get their hopes up. Depending on how close the buyer and seller are to closing, it’s not legally possible for the seller to accept another offer.
Additionally, the closer a home gets to closing, the more complicated competing offers can be. This is when a seasoned real estate agent may come in handy. They will understand the market, process, and legalities better than most first-time buyers do and how to navigate a hot house market.
Recommended: Guide to Buying, Selling, and Updating Your Home
The Takeaway
Contingent vs. pending: Though some use the words interchangeably, the two statuses are different. A contingent deal may have a long way to go, as buyers firm up financing, await an appraisal, or sell their current home. A pending property is near closing, but the deal still isn’t final.
Buyers eyeing a choice property may hold out hope that contingent or pending deals fall through. In that case, having everything set up for a backup offer could pay off.
If you’re coming in with cash, OK. But if you’re like most mortals and are seeking a mortgage, being prequalified, and then preapproved, shows you’re a serious buyer.
On the hunt for a home and a mortgage? SoFi offers mortgage loans with competitive rates and as little as 5% down.
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