The Difference Between Contingent and Pending

From time to time the terms "contingent" and "pending" are used interchangeably in a real estate transaction. While they have similar meanings, they are unique. They have different impacts on both the buyer and the seller in a real estate deal. As homes have been selling with multiple offers and at record speeds over the past few years, home buyers have been watching home statuses carefully in case contracts fall through. This is where the importance between contingent and pending comes into play even more.

Contingent Status

When a house is in contingent status, it means that it has a contract on it but that there are contingencies that the buyer must meet. The buyer must meet these contingencies by a certain date. If the buyer does not meet these contingencies, he/she can get out of the contract without losing any money. The buyer's earnest money is protected during the contingency status. Contingencies create risks for the home seller. The home seller must sit by and watch the dates carefully in hopes that the buyer will meet each contingency on time. Here are a few contingencies that are common in a real estate transaction:


Attorney Contingency

Some states use attorneys in real estate transactions. In these states, there is typically an attorney contingency. This is a period right after the contract is signed and fully executed between the buyer and the seller. The contract usually allows for five business days for both the buyer's attorney and the seller's attorney to review and approve the contract. If the attorneys have any changes they would like to make, they negotiate those changes with each other during this period of time.

Inspection Contingency

The inspection period typically lasts five to ten business days after the contract is signed. During this time the buyer must get the inspections completed. Most buyers have a whole house inspection. Some other inspections that a buyer might want to consider are a radon inspection, a pest inspection, a mold inspection, a sewer inspection, and a lead-based paint inspection if the house was built before 1978. If there are defects or safety hazards found in any of the inspections, the buyer and seller can negotiate remedies during this contingency time. If there are too many defects found and there are no resolutions found, the buyer can cancel the contract.

Financing Contingency

The financing contingency gives the buyer time to obtain a clear-to-close on his mortgage. This contingency is typically the longest. During this time the buyer must submit all the financial documents require by the mortgage company, have an appraisal done and wait for the file to go through underwriting. This contingency can take weeks because both parties are at the mercy of the mortgage lender. It is no wonder that sellers prefer cash deals.


Other Contingencies

Sometimes a buyer and a seller negotiate other contingencies. The most common are a "house to sell" or a "house to close" contingency. If the buyer has a house to sell before he can close on a home, he will ask for a certain amount of time to be able to do this. This is a huge risk to the seller because many times he is asked to allow this contingency until the buyer's home closes. This can take a month or more. A house to close contingency means that the buyer has his house under contract and is just waiting for it to close. This is a bit less risky for the seller, especially if the buyer's contract is further along in the transaction process. A kick-out clause is common with these contingencies, allowing the seller to continue showing their home during this time period. This makes it less risky for the seller.

Pending Status

A transaction is considered pending when all of the buyer's contingencies are met and the deal is awaiting a successful closing. This is the time when the seller can take a deep breath and relax. While many real estate professionals say, "It isn't closed until it is closed," a pending status is the closest a buyer and a seller will get to closing. During the last couple years when homes were selling quickly and home values were rising, many buyers were waiving contingencies to get sellers to accept their contracts.

With the future of real estate unknown and the market starting to balance, buyers will be less likely to waive contingencies as they were over the past few years. Home values are expected to continue to rise slightly in some markets, but not in all markets. It is important to discuss your particular market and what is expected in regard to contingencies with your real estate agent.