Contingent VS Pending: What's the Difference?
Published on March 18, 2024 | 4 Minute read
Melanie
Ortiz Reyes
Content Specialist
Terminologies like "contingent" and "pending" often cause confusion among buyers, sellers, and even seasoned agents. While both terms indicate progress in a property transaction, they signify distinct stages in the process. Understanding the disparities between contingent and pending statuses is crucial for anyone navigating the real estate market.
Contingent Status
When a property is labeled as contingent, it means that an offer has been accepted by the seller, but certain conditions must be met before the sale can proceed smoothly. These conditions, known as contingencies, serve as safeguards for both the buyer and the seller. Common contingencies include:
Home Inspection - The buyer may request a professional inspection to assess the property's condition. If significant issues are uncovered, the buyer might negotiate repairs or request a price reduction.
Appraisal Contingency - This contingency allows the buyer to back out of the deal if the property's appraised value is lower than the agreed-upon purchase price. Alternatively, they can renegotiate with the seller based on the appraisal results.
Financing Contingency - Most buyers rely on mortgage loans to purchase a property. A financing contingency protects them by allowing them to withdraw from the contract if they fail to secure adequate financing within a specified timeframe.
Sale of Existing Home - In situations where the buyer needs to sell their current home to fund the purchase, a sale contingency may be included. This gives them a certain period to sell their property before finalizing the purchase of the new one.
While a property is contingent, it remains active on the market, and sellers may continue to entertain backup offers. If all contingencies are met satisfactorily, the status of the property transitions to pending.
Pending Status
Once all contingencies have been successfully addressed and removed, the property's status changes to pending. At this point, the sale is considered to be in its final stages, with only administrative tasks remaining before the closing. Key aspects of the pending stage include:
Earnest Money Deposit - Upon reaching the pending stage, the buyer typically submits an earnest money deposit to demonstrate their commitment to the purchase. This deposit is held in escrow and is applied towards the down payment or closing costs at the time of closing.
Title Search and Insurance - The title company conducts a thorough title search to ensure there are no liens or legal issues associated with the property. Once the title is deemed clear, the buyer purchases title insurance to protect against any unforeseen claims to the property's ownership.
Finalizing Mortgage and Paperwork - The buyer works closely with their lender to finalize the mortgage loan, providing any additional documentation required for underwriting. Simultaneously, both parties complete the necessary paperwork, including the purchase agreement, disclosures, and any other legal documents.
Closing Preparations - As the closing date approaches, the buyer schedules a final walkthrough of the property to ensure it's in the agreed-upon condition. Meanwhile, the seller arranges for utilities to be transferred out of their name, and both parties coordinate with their respective real estate agents and attorneys to ensure a smooth closing process.
Key Differences and Implications
While both contingent and pending statuses signify progress in a real estate transaction, their distinctions are significant:
- Flexibility - Contingent properties offer more flexibility as they remain active on the market and may still entertain backup offers. In contrast, pending properties are off the market, and any offers made are typically considered backup offers.
- Certainty - Pending status indicates a higher level of certainty in the transaction, as all contingencies have been removed, and the deal is nearing its finalization. Contingent status, on the other hand, carries a degree of uncertainty as certain conditions must still be met.
- Timeline - The timeframes associated with contingent and pending statuses vary depending on factors such as market conditions, the complexity of contingencies, and the efficiency of involved parties. Generally, contingent periods are longer than pending periods, as they involve the resolution of contingencies before progressing to the pending stage.
Understanding the disparities between contingent and pending statuses is crucial for anyone involved in real estate transactions. Whether you're a buyer or seller, knowing the implications of each status enables you to navigate the market with confidence and make informed decisions at every stage of the process. By grasping the intricacies of contingent vs. pending, you can streamline your transaction experience and ensure a successful outcome for all parties involved.