Examples of Contingencies
Common contingencies in a real estate transaction include:
- Financing contingency: The sale is contingent upon the buyer obtaining financing for the purchase.
- Home inspection contingency: The sale is contingent upon a satisfactory home inspection.
- Appraisal contingency: The sale is contingent upon the property being appraised at or above the sale price.
- Sale of buyer’s property contingency: The sale is contingent upon the buyer selling their current home.
Contingency Removal Process
The contingency removal process varies by state and can be complex. Generally, the buyer has a set period of time to complete the contingency requirements. Once the contingencies are satisfied, the buyer can remove the contingencies and the sale can proceed to closing. If the contingencies are not satisfied within the agreed-upon timeframe, the sale may fall through.
Understanding Pending Status
Definition
A pending status means that all contingencies have been satisfied and the sale is in the final stages of completion. The only thing left to do is to close the sale and transfer ownership of the property to the buyer.
Reasons for Pending Status
Pending status can be the result of many different factors, including:
- Successful completion of all contingencies
- Appraisal at or above the sale price
- Receipt of final loan approval
- Completion of all necessary repairs
- Closing date set
Differences between Pending and Contingent Status
The primary difference between pending and contingent status is that a pending sale is closer to completion than a contingent sale. In a pending sale, all contingencies have been satisfied, and the sale is waiting for final approval from the buyer’s lender.
How Contingent and Pending Status Affect Home Buyers and Sellers
Contingent Status
Advantages for Buyers
If you’re a buyer, a contingent sale can give you time to complete due diligence, such as a home inspection, and obtain financing. You’ll typically have a set period of time to satisfy the contingencies, so you can use that time to ensure that the property is the right fit for you and your needs. If the contingencies are not satisfied within the set period, you can walk away from the sale without penalty.
Disadvantages for Sellers
If you’re a seller, a contingent sale can be risky because the sale is not final until the contingencies are met. If the buyer is unable to satisfy the contingencies, the sale could fall through, and you’ll have to put the property back on the market. This can be frustrating and time-consuming, especially if you have already made plans to move.
Pending Status
Advantages for Sellers
If you’re a seller, a pending sale is generally a good thing because it means that all contingencies have been satisfied, and the sale is in its final stages. The only thing left to do is to close the sale, and transfer ownership of the property to the buyer.
Disadvantages for Buyers
If you’re a buyer, a pending sale can be frustrating because you can’t make an offer on the property while it’s in pending status. If the sale falls through for any reason, the property will go back on the market, and you’ll have to start the process all over again.
Tips for Dealing with Contingent and Pending Status
For Buyers
If you’re dealing with a contingent or pending sale, it’s important to be patient. Real estate transactions can be complex, and there are many factors that can impact the timeline. Stay informed, but also be prepared to wait.
Stay in close communication with your real estate agent throughout the process. Ask questions and stay up to date on the status of the sale. This will help you make informed decisions about the sale and reduce the stress of the process.
If the sale falls through, have a backup plan in place. Consider looking for other properties that meet your needs or revisit properties that you previously considered.
For Sellers
If you’re selling a property with contingencies, be proactive in addressing them. Work with the buyer to ensure that the contingencies are met within the agreed-upon timeframe. This will help reduce the risk of the sale falling through.
Understand that a contingent sale is not final until the contingencies are met. There is always a risk that the sale could fall through, so be prepared for that possibility.
Consider accepting backup offers if the property is in contingent status. This can provide a safety net in case the sale falls through.
Conclusion
Contingent and pending status are important terms to understand when buying or selling a home. A contingent sale means that the sale is contingent upon certain conditions being met, while a pending sale means that all contingencies have been satisfied, and the sale is in its final stages. It’s important to understand the differences between the two and how they affect the buying and selling process. By staying informed, being patient, and having a backup plan in place, buyers and sellers can navigate the process with greater ease and success.
FAQs
Q1: What happens if a contingency is not met in a real estate transaction?
If a contingency is not met in a real estate transaction, the sale may fall through, and the buyer may be able to back out of the sale without penalty.
Q2: Can a buyer make an offer on a property that is in pending status?
Generally, a buyer cannot make an offer on a property that is in pending status because the sale is already in its final stages.
Q3: How long does it take to satisfy contingencies in a real estate transaction?
The length of time to satisfy contingencies in a real estate transaction can vary depending on the specific contingencies and the terms of the sale agreement.
Q4: Can a seller accept backup offers while a property is in contingent status?
Yes, a seller can accept backup offers while a property is in contingent status. This can provide a safety net in case the sale falls through.
Q5: What are some common contingencies in a real estate transaction?
Common contingencies in a real estate transaction include financing, home inspections, appraisals, and title searches.
Note: This guide is for informational purposes only. Meridian Trust does not make any guarantees about the sufficiency of the content in or linked to from this blog post or that it is compliant with current law. The content within this blog post is not a substitute for legal advice or legal services. You should not rely on this information for any purpose without consulting a licensed lawyer in your area.
