If you are looking to buy a home, you have probably seen the word Contingent. You may be wondering what Contingent means. If you are thinking about selling your home or if you already have your house on the market you also need to fully understand the word Contingent.
Contingent Definition – An offer has been accepted by the seller of a home, but the sale is contingent or subject to specific criteria that must be met before the sale is finalized.
Difference Between Contingent and Pending – A property that is Contingent has an accepted offer on it that has contingencies like Inspections, Appraisals, HOA Requirements all of these must be cleared before the transaction can be closed. A property that is Pending either had no contingencies on the accepted offer or the contingencies have all be cleared and removed and the property is just waiting to close.
What does all that really mean?
How Does Contingent Properties Affect Buyers?
A property that is contingent can still be shown to other buyers. Other buyers can place back up offers on the property. The only way the backup offer can be considered is if the initial offer falls through due to one of the contingencies. At that point the seller can negotiate with the backup offer.
Most buyers won’t look at properties that have a Contingent status. They feel like it is a waste of time, agents feel even stronger about this then most buyers do. This is because chances are the initial offer will go through and close and at the point the backup offers just disappear.
Buyers can end up wasting valuable time waiting to see if their backup offer will even come into play. They may end up missing out on a property that is just as good or even better then the property they are waiting on.
On occasion it might be worth putting a backup offer on a contingent property. I always tell my buyer clients that it doesn’t hurt to look. So, I don’t shy away from contingent properties, but I do make sure my client understands the whole situation before we schedule the showing.
If a buyer can not find a property that they like that is in “Active” status I will then look at the contingent properties to see if there is something that might work for them. Contingent properties should be considered a possibility but make sure you understand the whole situation.
How Does Contingent Properties Affect Sellers?
If you are thinking about selling your home or you already have it on the market you need to fully understand what placing your home in contingent status means. As I mentioned above there is a difference between Pending and Contingent.
The biggest difference for the seller is that a home placed in Pending status will no longer be shown and there will be no opportunities to receive a backup offer. When you place your home in Contingent status you can still show your home and receive backup offers.
If you receive an offer on your home that has Inspections, Appraisals or other contingencies like the buyer’s home needs to sell before they can purchase your home, then you should always place your home in contingent status until the contingencies are removed.
Occasionally I will receive an offer on one of my listings that has no contingencies, no inspections and no appraisal, it’s usually an all cash offer that can close fast. When I receive this type of offer, I put the home in Pending status because as soon as I get all signatures on the purchase agreement it’s a done deal.
If you are thinking about selling your home, make sure you read my article “Should I Sell My House Now”.
If you are interested in buying a home check out my article “Path to Homeownership”.
Whether you are buying or selling or interested in investing in real estate I have plenty of free materials on my Resources page. Check it out!
If you have any questions leave me a comment below or send me an email at Matt@REinvestWise.com I will get back to you quickly.