Home is not just your asset or a place to stay.
Home is all about that warmth,that emotion and that satisfaction.
So, how do you start the entire thing?
By searching, right?
Well, how does the Country search for homes today?
While on the search, you’ll notice that, not every listing has a simple “for sale” next to that price tag. Some might say “pending,” others might say “contingent,” while others may have even more detail, like “contingent—continue to show” or “pending—taking back-ups.”
Basically, all of these phrases indicate that the home is in some stage of the sale process. Knowing the differences between contingent and pending can help you spot properties that you still might be able to buy, and how to move forward if you’re interested in bidding on one of them.
Contingent vs Pending
Contingent means that there is a provision in the contract that must be met prior to the transaction closing. For example it is customary for there to be contingencies for inspections, appraisals, the buyer selling another property before closing on the property in question. In other words, the seller of the home has accepted an offer—one that comes with contingencies, or a condition that must be met for the sale to go through.
Sample reasons include
1.Pass a home inspection – Even in an “as-is” contract sale, the buyer may have the home professionally inspected. This may be mandatory per the mortgage lender as well. If the repairs are excessive the buyer may have the right to exit the contract and get their money back.
2.Appraisal Contingency-Probably the most common contingency of them all. No home buyer wants to overpay for an overpriced property. Home mortgage lenders are going to demand an appraisal to make sure that they aren’t lending too much either. This clause makes the deal contingent on the property appraising for at least the purchase price on the contract. If it doesn’t, the buyer can cancel and get their earnest money deposit back. Or the contract can be renegotiated. It normally will be as the seller will have a very difficult time selling to anyone else at that higher price too.
3.Financing Contingency Clause – A financing contingency means that the contract is contingent on the buyer obtaining financing. The terms of this financing may even be spelled out in the contract as well. For example, getting at least a 95% LTV loan, at not more than 6% fixed interest for 30 years. This protects the buyer from being hit by bait and switch by a mortgage bank at the last minute. If the final approved loan terms are inferior, the buyer has the right to cancel the contract and get their deposit money back, or continue, or renegotiate.
4.Title Contingencies- The buyer and lender will also want a title search performed to check for liens, and to verify the legal property description and who the legitimate sellers are. As a buyer you should get a title insurance policy. Any banks involved will definitely demand a lender’s title policy covering their interests.
Either way, the listing is still technically active until the contingency has been met. When the offer has been accepted, and all that’s left is the final paperwork and closing, the status switches to “pending.”
In technical words, if all goes well, any original contingencies will be ironed out and considered satisfied by both parties. The listing is then marked as pending. At this point, the deal is close to being sewn up as the buyer and seller await the closing.
There are several types of pending sales:
1.Short sale – When a homeowner is upside down on their mortgage (i.e., they owe more than what the home is worth ), they may opt for a short sale to avoid foreclosure. In this situation, the purchase price is less than the remaining mortgage balance. Additional lenders will need to sign off on this offer in order for the deal to close. Translation: the deal can still fall through.
2.Taking backups- If the seller fears, for whatever reason, that there’s a chance the deal may not come to pass, they might decide to look at backup offers. It’s a just-in-case scenario. The owner can accept a backup offer only if the original deal disintegrates. Put it another way: they can’t back out of the original deal because they received a stronger backup offer.
3.Pending, More Than 4 Months- The Pending – More Than 4 Months status happens automatically in the MLS, when a listing has been pending for more than 4 months. This could be an indication that something about the sale transaction is taking longer than it does on average. It may also be that the listing agent forgot to change the status from Pending to Sold after closing.
Difference between Pending and Contingent
The difference can be very well put out,if we know which of them is better !!
Ok, so for a layman – “The lesser contingencies a buyer has, the better “.
If you are representing a seller and have a contract for home buyers, that has additional contingencies that are written into it, it’s not as strong of an offer as one that wouldn’t need to go through additional hurdles, so that makes a very big difference—especially in multiple-offer situations. If you can come in having any additional contingencies already removed, your offer is going to be substantially stronger.
When comparing properties, listings marked as contingent are a better choice for prospective buyers because the sale isn’t a done deal. There’s still a chance that a contingency won’t be met and that the home will become available to other interested parties. In a nutshell, this indicates a higher level of opportunity for hopeful home buyers and so now, we have very much known the difference at the concept level.
Cutting the long story short,Contingent deals are still active listings (which is why they are often called active contingent), because they are liable to fall out of contract if requested provisions are not met. If all goes well, contingent deals will advance to a pending state. Pending deals are, quite simply, when a property is marked as pending and an offer has been accepted by the seller.
Meanwhile,Celebrated Real Estate Business Strategist, Astrologer and Adviser, Hirav Shah Quotes- “Your home is likely the biggest investment you’ll make in your life, which can also make it your biggest risk“.
But not to worry…
Astro-Strategist Hirav Shah can guide you towards making the smartest decisions based on certainty.