Understanding the Real Estate Jargon
When you are in the process of buying or selling a house, you might come across various real estate terms that can be confusing. One such term is “pending,” which indicates that a property is under contract and the sale is in progress. However, sometimes a house that was initially marked as pending may switch to “contingent,” leaving many people wondering what this change means.
Exploring the Contingency Stage
When a house is listed as contingent, it means that the seller has accepted an offer from a buyer, but certain conditions must be met before the sale can be finalized. These conditions are called contingencies and can include factors such as inspections, appraisals, financing, or the sale of the buyer’s current home. The contingent status allows the seller to continue to show the house and accept backup offers in case the primary offer falls through.
There are several common contingencies that you may encounter when a house is marked as contingent. The most typical contingencies include:
1. Inspection Contingency: This allows the buyer to have a professional home inspection to identify any potential issues. If significant problems are discovered, the buyer may negotiate repairs or request a price reduction.
2. Financing Contingency: This contingency ensures that the buyer can secure the necessary financing to complete the purchase. If the buyer is unable to obtain a mortgage, they can withdraw from the contract without any penalty.
3. Appraisal Contingency: An appraisal contingency protects the buyer by allowing them to back out of the deal if the appraised value of the house is lower than the agreed-upon purchase price. This contingency ensures that the buyer does not overpay for the property.
4. Sale Contingency: This contingency is applicable if the buyer needs to sell their current home before they can complete the purchase of the new property. It gives the buyer a specific timeframe to sell their home and allows the seller to continue marketing the house.
Timeframe for Contingency Period
The length of the contingency period can vary depending on the terms negotiated between the buyer and the seller. It is typically specified in the purchase agreement and can last anywhere from a few days to several weeks. During this time, the buyer must fulfill the contingencies outlined in the contract. If the contingencies are not met within the specified timeframe, either party may terminate the agreement.
Implications for Buyers and Sellers
For buyers, a contingent status can be frustrating as it means they must wait for the contingencies to be satisfied before the sale can proceed. However, it also provides them with an opportunity to negotiate repairs or price reductions based on the inspection or appraisal results.
For sellers, a contingent status means there is still a level of uncertainty in the sale. They must continue to market the property and may accept backup offers in case the primary offer falls through. However, once all contingencies are met, the sale can proceed, and the house is considered sold.
Understanding the difference between pending and contingent is crucial when navigating the real estate market. A house going from pending to contingent indicates that the sale has reached the contingency stage, where certain conditions must be met before the transaction can be finalized. Whether you are a buyer or a seller, being aware of these contingencies and their implications can help you navigate the process with confidence.