When previewing homes online, have you ever run across some that have a status of Contingent? Do you know what this means? Do you usually forget this home and keep searching?
Many prospective buyers shy away from homes that are contingent because it appears that an offer is already in motion. Why waste the time on a home that isn’t available? This may be a big mistake.
An attempt to shed some light on the Contingent status of a home…
Most real estate listings will have a “Status”. Example statuses include:
- Subject to Inspection (STI)
Most of these are self-explanatory…
- Active means that the property is for sale. Come on over and make us an offer.
- Subject to Inspection means that a buyer’s offer is pending their inspection. The buyer will hire an inspector to make sure that there are no problems with the condition of the home. If the inspection yields issues that need attention, the buyer may request that the seller fix these issues, after which their offer to buy becomes official. This is especially common in buyer’s markets, like we are experiencing currently. In hot markets, as seen during the past few years, many buyers were waiving their inspection all together in hopes of making their offer more attractive.
- Contingent gets a bit tricky. Essentially, the buyer wants to make an offer, but must first sell their own house (so they have money to buy). The buyer has already inspected the house and is ready to make an offer… they just don’t have the money available until their own house sells. Thus, their offer becomes “contingent” on them selling their own house first.
- They make a contingent offer on the house, agreeing to buy it once their house sells. The contingent offer is good for a specific duration, usually 30-45 days, during which if the buyer’s house sells, they are contractually obligated to purchase the seller’s house.
- The seller can accept the contingent offer, but should do their own verification and make sure that this buyer is credible. One thing to check for sure is the buyer’s house and asking price. Once a contingent offer is agreed upon, the buyer must put their house on the market within 3 days and to advertise it with the multiple listing service (MLS).
- During the contingent period, the seller can certainly entertain other offers, however, the contingent buyer has “first dibs” during this time, assuming they sell their own home first.
- Sometimes the status can be shown as CTGI – contingent on inspection.
- The inspection contingency (if there is one) is removed before the property goes contingent. Once the buyer removes their contingency, the house can go pending. The contingent buyer has spent the money for whatever inspections they wanted, so they have demonstrated their commitment.
- A contingent house is still available for other offers, but the new buyer will have to wait an additional 3-5 days to find out if their offer is accepted. (Sometimes this waiting period is 10 days, and is decided by the initial contingent contract between the seller and contingent buyer.) The contingent buyer has this period of time to come up with the money and move forward with the sale. If they can’t come up with the money, the seller may accept the new buyer’s offer and be released from the contingent contract.
- So, in short, the contingent offer can be trumped at any time unless the contingent buyer can suddenly come up with the money to move forward with their purchase agreement. In this respect, a contingent house is definitely worth pursuing.
- Pending means that the inspection period is over and the parties are just waiting for financing and paperwork to be completed.
- Sold is what we are all hoping for in the end!
The truth is, a contingent home may still be worth seeing. Many contingent deals will fall through, leaving the seller looking for a new buyer. Even if in a contingent contract, the seller still has the freedom to accept another offer.
Here’s a few additional resources for learning more about real estate status: