Contingent vs Pending: What's the Difference?

Searching for new homes to purchase can be a daunting task. As you do your research, you may be mystified by the various statuses of homes. Why are some homes “contingent?” Are those with status “pending” a better choice? What do all these terms mean, and how can they impact your home search? If you’re not familiar with these terms, you can find yourself a bit lost, like a fish out of water. 

This is true whether you’re looking at new homes to purchase or multi-family properties for sale. For buyers and sellers, these terms can make a big difference in your home search, so it’s vital to have some knowledge of what they mean.

What Does Contingent Mean on a Home for Sale?

A contingent home has an accepted offer from the seller that has not yet been put under contract and entered into a pending status. The status of the contingent home for sale is conditional acceptance; the transaction is in process, but with conditions that need to be satisfied before closing.

Common Contingencies in Real Estate Transactions

Contingencies serve as protective clauses that allow buyers to back out of the purchase without losing their earnest money deposit if certain conditions aren't satisfied. Here are the most typical contingencies you'll encounter:

• Home Inspection Contingency: The buyer has the right to hire a professional inspector to examine the property's condition. If significant issues are discovered—such as structural damage, roof problems, or faulty electrical systems—the buyer can negotiate repairs, request a price reduction, or withdraw from the contract entirely.
• Appraisal Contingency: The property must appraise at or above the agreed-upon purchase price. If the appraisal comes in lower than expected, the buyer can renegotiate the price, bring additional cash to closing, or cancel the agreement.
• Financing Contingency: The buyer must secure mortgage approval within a specified timeframe. This protects buyers from being forced to complete a purchase if their loan application is denied.
• Home Sale Contingency: The buyer needs to sell their current home before purchasing the new property. This contingency gives buyers time to close on their existing home before committing to the new purchase.
• Title Contingency: The property must have a clear title with no liens, disputes, or legal issues that could affect ownership transfer.
  

Can You Still Make an Offer on a Contingent Property?

For motivated buyers, this is where it gets interesting. In most cases, you can, in fact, make an offer on a contingent home. In fact, sellers often will take a backup offer as a form of insurance if the first deal falls through. Industry statistics reveal that fifteen to twenty percent of contingent sales fail to close, making backup offers the winning offer on occasion.

A backup offer places you behind the existing buyer. If a contingency falls through and the first buyer backs out, the seller can pass on the house without having to relist it and start all over, choosing instead to continue with your offer.

What Does Pending Mean on a Home for Sale?

Pending means that a home for sale has moved out of the contingent phase. All major contingencies have been met or waived, and both parties are working towards closing. The transaction is in the final phase, with attorneys doing document review, lenders completing loan documents, and both parties preparing for the transfer of ownership.

The Journey from Contingent to Pending

The jump from contingent to pending is a huge deal in the home-buying process. This is what usually goes down for this advancement:

The home inspection was done, and negotiated repairs were agreed upon. The property was appraised and met the lender’s valuation. The buyer’s financing was approved, and underwriting is finalizing the process. The title search was completed, and title issues were resolved. Now, both sides are just waiting for closing day.

Is a Pending Sale Really Final?

Pending sales have a very good chance of eventually closing, but they're far from a sure thing. In fact, between five and ten percent of all pending sales fall through before closing. There can be all sorts of reasons why a pending sale would fall through, including late financing, last-minute problems found during the final walkthrough, or just both parties getting cold feet.

However, making an offer on a pending home is usually not recommended, and is often not possible in many markets. Most real estate agents and sellers won't even consider new offers once a property is in pending status because they are so close to actually closing the deal.

Key Differences Between Contingent and Pending Status

It’s important for both buyers and sellers to recognize the differences between the two. This status determines how close the sale is to being done and the number of obstacles that must be cleared.

A contingent property still has one or more conditions to be met before progressing. The buyer has more flexibility to terminate the agreement if they don’t want to proceed. The time frame is less certain, and the likelihood of the deal not closing is higher. Sellers are more likely to entertain backup offers at this stage.

A pending property has satisfied most of the large contingency items. The buyer is more committed and it would be more difficult for them to back out. The time frame is clearer, normally within thirty days or less. Sellers usually stop accepting new offers at this stage.

Why These Distinctions Matter for Multi-Family Properties for Sale

It’s important to note that this contingent versus pending distinction is especially important with multi-family properties for sale. These investment properties will typically involve more complex transactions, and the contingent period can last significantly longer.

For starters, multi-family properties are going to typically require more due diligence than single-family homes. Buyers have to look at rent rolls, examine existing leases, verify income/expenses, assess condition across multiple units, and more. Commercial lenders that specialize in multi-family properties tend to have more stringent requirements as well, and approval can take longer. Environmental assessments might be required for larger properties as well.

For an investor who is shopping for multi-family properties for sale, a contingent listing could present a prime opportunity to send a competitive backup offer. Because the transaction is more complex, it’s more likely that the primary deal could fall through.

Strategic Considerations for Buyers and Sellers

For Buyers

When you encounter a contingent property that matches your criteria, don't immediately dismiss it. Reach out to your real estate agent to determine what contingencies are in place and when they're expected to be satisfied or removed. If you're seriously interested, consider submitting a backup offer with favorable terms that might appeal to the seller if the primary deal falls apart.

Stay alert and maintain communication with the listing agent. If the property moves to pending status without your backup offer being accepted, shift your focus to other opportunities rather than waiting for a deal that's unlikely to fail.

For Sellers

Understanding these status labels helps you manage expectations and communicate effectively with potential buyers. When your property is contingent, be prepared for questions from other interested buyers and their agents. Having a clear timeline for when contingencies will be satisfied helps everyone plan accordingly.

Consider the strength of backup offers carefully. A strong backup offer can provide peace of mind and leverage if negotiations with your primary buyer become challenging.

How Professional Guidance Makes a Difference

Real estate transactions involve numerous complexities that extend far beyond understanding status labels. Working with experienced professionals who know the local market intimately can help you navigate both contingent and pending properties effectively.

At Atwal Realty, experienced agents provide clients with comprehensive guidance throughout every stage of the buying or selling process. Their team understands the nuances of different property statuses and can help you develop strategies that maximize your chances of success, whether you're pursuing a contingent single-family home or evaluating multi-family properties for sale.

The real estate landscape changes constantly, with properties moving from active to contingent to pending within days or even hours in competitive markets. Having knowledgeable professionals monitoring the market on your behalf ensures you don't miss opportunities and can act quickly when the right property becomes available.

Understanding Timeline Expectations

Timelines vary significantly depending on whether a property is contingent or pending, and these timeframes can affect your planning considerably.

For contingent properties, the duration depends entirely on the contingencies in place. A home inspection contingency might be satisfied within seven to ten days, while a home sale contingency could extend for sixty days or longer. Financing contingencies typically run for thirty to forty-five days, depending on the lender and loan type.

Pending properties usually close within fifteen to thirty days from the pending status change, though this can vary based on the agreed-upon closing date in the purchase agreement. Cash transactions often close faster than financed purchases because they eliminate the lending timeline.

The Role of Market Conditions

Real estate market conditions significantly influence how contingent and pending statuses function in practice. In a seller's market with limited inventory and high demand, contingent properties might receive multiple backup offers, and buyers may waive contingencies to make their offers more competitive. Some buyers even remove contingencies prematurely to move properties from contingent to pending status faster, though this strategy carries significant risk.

In a buyer's market with abundant inventory and fewer competing buyers, contingent properties might sit longer as buyers take full advantage of protective contingencies. Backup offers become less common because buyers have numerous other options available. Sellers might be more willing to consider new offers even after accepting an initial contingent offer.

Making Your Move

A first-time homebuyer might not know what contingent mean on a home for sale. On the other hand, a seasoned investor might be wondering what’s the best type of multi-family property is to buy next. Either way, the more information you have, the better.

The distinction between contingent vs. pending can help you manage your expectations, time your offer, and have a backup plan in case a house falls through.

Stop letting a lack of knowledge on house statuses stop you in your tracks. The home you want might be in contingent status right now, but it’s still yours for the taking if you have a solid backup offer as a buyer. As a seller, you might be faced with several offers that all have different contingencies. By now, you know which offer would represent the best opportunity.

The mix of knowing what’s up in the market, taking decisive action, and working with the right professionals will lead you to real estate success. By knowing what pending means on a home for sale as opposed to contingent status, you’re well ahead of the pack.

Frequently Asked Questions

Q: How long does a property typically stay in contingent status? 

A: Most properties remain contingent for 30-45 days, though this varies based on the contingencies involved. Home sale contingencies can extend this period to 60-90 days, while inspection-only contingencies might be satisfied in 7-14 days.

Q: Can I view a home that's marked as pending? 

A: Generally, no. Once a property reaches pending status, showings typically stop because the sale is in its final stages. However, some sellers may allow viewings if you have a compelling backup offer, though this is uncommon.

Q: What happens to my earnest money if I'm in a contingent contract and the contingencies aren't met?

 A: If you properly exercise a contingency clause according to the contract terms and timeline, you should receive your full earnest money deposit back. However, if you simply change your mind without a valid contingency reason, you may forfeit your deposit.

Q: Are contingent properties more common for multi-family properties than single-family homes? 

A: Yes, contingent periods often last longer for multi-family properties due to additional due diligence requirements, more complex financing, and the need to review operational documents like rent rolls and expense statements.

Q: Should I continue house hunting if my offer has been accepted and the property is contingent? 

A: It's wise to continue monitoring the market until all your contingencies are satisfied and the property moves to pending status. This keeps your options open if your deal encounters unexpected obstacles during the contingency period.