When buying or selling a home, the many terms and concepts can be confusing to individuals unfamiliar with the real estate industry. Two terms that often come up in real estate transactions are “contingency” and “pending.” In this article, we will define and explore the differences between these terms and the types of contingencies that may appear in a real estate contract.

Contingency in Real Estate

A contingency means a condition must be met before a property can be sold. These conditions are written into the purchase contract and are usually added to protect the buyer from unexpected circumstances that could make the purchase undesirable or unaffordable.

There are a few types of contingencies that can be included in a real estate contract, including but not limited to the following:

1. Financing Contingency – This contingency states that the sale of the property depends on the buyer obtaining financing. If the buyer cannot secure financing, they can withdraw from the sale without penalty.
2. Inspection Contingency – This common contingency allows the buyer to have the property inspected by a professional before the sale is completed. If the inspection reveals any issues with the property, the buyer can either request repairs or back out of the sale.
3. Appraisal Contingency – This contingency states that the property’s sale depends on the property being appraised at or above the agreed-upon purchase price. If the property is appraised at a value lower than the agreed-upon sale price, the buyer may renegotiate the purchase price or back out of the sale.
4. Title Contingency – This contingency allows the intended purchaser to back out of the sale if there are any property title issues, such as liens or judgments.
5. Sale Contingency – This contingency states that the sale of the property depends on the buyer selling their current home before completing the purchase. If the buyer cannot sell their existing property, they can withdraw from the sale without penalty.

It’s important to note that a contingency must be met before the property sale can be completed. If a contingency is not met, the would-be buyer of the property can back out of the deal without penalty.

Pending in Real Estate

When a property for sale has been listed as “pending,” an offer has been accepted, and the deal is in progress. The seller has accepted an offer, and the buyer has placed a deposit on the property. The sale is pending until all contingencies are met and the closing process is completed.

Pending indicates that all contingencies have been satisfied, and the sale is progressing toward the final closing stage, with most of the necessary paperwork completed. However, the transaction has yet to be finalized. It is generally more feasible to make an offer on a home with contingencies rather than a pending one.

A sale may fall through even after the property is listed as pending, which can happen if a contingency is not met or the buyer decides to back out of the sale.

Contingent vs. Pending

In summary, a contingency is a condition that must be met before a property can be sold. The property is pending when an offer has been accepted and the sale is in progress. A deal can fall through even after the property is listed as pending, but once all contingencies are met and the closing process is completed, the sale is considered final.

Both buyers and sellers need to understand the differences between these two terms. Buyers should be aware of any contingencies in the purchase contract and ensure they are met before proceeding with the sale. Sellers should be prepared for the possibility of a deal falling through, even if the property is listed as pending.

Contingencies and pending are essential terms to understand in the real estate industry. A contingency is often a condition that must be met before a property can be sold, while a pending status means that an offer has been accepted and the sale is in progress. Understanding a real estate contract’s different types of contingencies is also crucial.

As a buyer, it’s essential to be aware of the contingencies included in the purchase contract and ensure that they are met before completing the sale. This will help protect you from unexpected circumstances that could make the purchase undesirable or unaffordable. It’s also important to understand that if a contingency is not met, you can back out of the sale without penalty.

As a seller, it’s essential to understand that even if your property is listed as pending, a sale can still fall through if a contingency is not met or the buyer decides to back out of the sale. It’s essential to be prepared for this possibility and have a backup plan.