Contingent

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When you and your clients are searching the market for new homes, often you’ll run across properties in different states of activity. A contingent property simply means an offer for the property has been accepted by the seller. They are still labeled active listings because if requested provisions are not met the offer could fall through.

What is a Contingent Property in Real Estate?

Definition: A contingent property means an offer for the property has been accepted but there is a condition or “contingency” that is written into the contract and it must be met before the sale can go through. In order for the contract to be legally binding, the contingency must be met.

Example: A common example of a contingent property is when the buyers of a home include a clause on the contract that states it is not binding until a satisfactory home inspection from a home inspector is completed. Once the home inspection is completed, the contract is then legally binding, and the sale can proceed.

What is a Pending Property in Real Estate?

The term pending means that the offer has been accepted and both parties are moving forward with the sale. When a property is pending, it is in the period after the contingencies are resolved.

It’s normally not the best idea to make an offer on a property at this point as the odds of the sale completing are pretty high. Usually, a property that is listed as pending for awhile is under contract and is awaiting approval from the bank. There are some circumstances where a pending property deal will fall through, so it’s not a bad idea to keep an eye on the property.

What is an Active Property in Real Estate?

If you or your client sees a home listing with just “active” as their status, this indicates that the property is available for sale. This is the most basic and attractive status for buyers. This just means it’s up for sale, there are not any current offers with contingencies, and it is not in the pending process.

This is not to be confused with “Active Contingent” which is just another name for a contingent property.

Types of Real Estate Contingencies

There are many different types of contingencies in real estate. Some you’ll see more than others:

Inspection Contingency – If a home inspection reveals problems, the buyer can request repairs, compensation for the issue, or just cancel the offer completely.

Financial Contingency – A financing contingency provides a way for buyers to back out of the sale of the property if their loan falls through.

Appraisal Contingency – Most big lenders or banks require the buyer to have an appraisal done to the property before the loan is granted. This is to ensure the house is worth somewhat close to the price of the accepted offer.

Title Contingency – If the title for the property is under review the buyer can add a title contingency to the offer. During this process, a title report will be done which may reveal a conflicting ownership status, in which the buyer then can opt out of the sale.

Buyer’s Home Sale Contingency – This contingency allows the buyer to cancel the contract if they are unable to sell their current home in a specified amount of time. This is a tad bit risky for the seller because they have to wait for someone else’s house to be sold first in order to sell theirs. To combat the riskiness, typically this type of contingency allows the seller to continue to market the home to other potential buyers.

Should Buyers Make an Offer Contingent Property?

You or your clients may be eager to make an offer on the property if it is listed as contingent. The best time to make an offer on a home is when there are no contingencies… however, it is possible to make a successful offer while a property is labeled contingent.

Often the status will explicitly state if they are taking backup offers or not. If the case is they are, it’s not a bad idea to advise your client to make an offer. Although it can be quite risky, making an offer without contingencies is attractive to many sellers. It may pressure their current buyer also to drop their contingencies or leave the negotiations entirely.

Author:
Zackary Smigel is a real estate professional with a love for teaching, based out of Pittsburgh, PA. He's had the opportunity to work with some of the brightest minds in real estate and has spent years learning how to become a successful agent.