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Active Contingent And Pending Homes: What’s The Difference?

Hanna KielarAugust 15, 2019

Whether you’re a first-time homebuyer or an old pro, home buying lingo can be confusing. Many potential home buyers get caught up on what an active contingent versus pending status is when they’re looking at homes online. So, if you’re unsure of what the difference is, here’s a little insight.

What Does “Active Contingent” Mean?

If a listed home is active contingent, it means a potential home buyer has made an offer on the property with contingencies. Before finalizing the offer, the homeowner must resolve the issues or problems. The most common contingencies are that the property must pass a home inspection, the buyer must receive a mortgage approval and the buyer must be able to sell their home.

Contingencies allow the buyer to get out of the contract with no repercussions. They help protect the buyer against any risk when purchasing a new home. While some contingencies may vary from state to state, there are some that are common throughout the country. Here are a few you may include in your contract when submitting an offer.

Mortgage Financial Contingency

Because many home buyers use a mortgage to finance their purchase, they want to ensure they have the proper funding before moving forward with the sale. Even if a potential buyer has gotten a preapproval, the final approval may still fall through if the underwriter discovers an issue with the buyer’s application. If financing does fall through, the buyer would want an out.

Home Inspection Contingency

Inspection contingencies give the buyer an “out” if they’re unhappy with the home inspection report. If repairs are minor, the seller may be able to address these issues. However, if the home requires several repairs, the new buyer may be unwilling to pay to repair the property. For example, if the house has a foundation crack, this may deter home buyers from moving forward with the sale. A foundation crack may require more money and time than the buyers are willing to devote to the issue.

Home Appraisal

Lenders use a home’s appraisal to ensure the buyer is paying an appropriate price for the property. Since the lender’s funds are on the line, they want to make sure the buyer is paying what the home is truly worth. In some cases, the home’s appraisal may come in less than the asking price. If this is the case, it gives buyers a chance to renegotiate for a better price.

Title Contingency

The title of a property shows the history of ownership. During the home buying process, a title company will review the home’s title to make sure it’s free and clear of any liens, disputes or other issues. Some issues may be able to be resolved during the buying process, while others may cause problems with the sale of the home. This contingency allows buyers to get out of the agreement if the title isn’t clear.

Sale Of Old Home

This provision makes the sale dependent on the sale of the buyer’s former home. Many sellers are reluctant to accept this sort of offer, especially if they are selling their home in a strong market. They may only take this sort of offer as a last resort if their home isn’t selling.

Active – Kick Out

This clause allows sellers to accept another offer if the new offer doesn’t have contingencies. This contingency essentially enables the seller to “kick out” the previous buyer.

What Does “Sale Pending” Mean?

Once the contingencies have been satisfied, the status of the home will change to “pending.” The house will remain in pending status until all of the documentation is completed and processed.

Here are a few of the most common pending types:

·     Pending – taking backup offers:If a seller has accepted an offer but some issues have come up in the final stages of the sale, they may receive backup offers.

·     Pending – short sale:When an accepted offer is a short sale, lenders or other financial institutions may have to approve the deal. A short sale is outside of the buyer’s or seller’s control.

·     Pending –more than 4 months:This is when an accepted offer is pending for more than 4 months. This can be due to delayed construction, negotiations or longer-than-usual processing times.

Should You Make An Offer On A Home If It’s Listed As Active Contingent?

You can make an offer at any stage of the home buying process. Until the house is listed as “sold,” you can submit your best offer. This is why it’s so important to have the most up-to-date information available and have the assistance of a real estate agent who understands how to manage complex home sale agreements.

If you’ve fallen in love with a home that is either active contingent or pending, it’s important you get in touch with a real estate agent as soon as possible to explore your options.

Pros Of Making An Offer

If a home is listed as active contingent, it means the house is already under contract. However, your real estate agent can do some research and determine what the contingencies are. This will help you decide whether you want to submit a backup offer in case something were to go wrong.

If you feel as though this is your dream home, submitting a backup offer may be beneficial. But remember, if the home is pending, the seller may not be able to accept unless the deal falls through with the first buyer.

Cons Of Making An Offer

If you do decide to submit an offer on an active contingent or pending home, be prepared for disappointment if your offer isn’t accepted. While the home buying process can come with many surprises, things may not work out in your favor.

On the other hand, if the first offer does fall through and your offer is accepted, you want to be sure you understand the background on the property. For example, if the offer fell through due to issues with the inspection, then you should be prepared for that. Having contingencies in place may be beneficial to ensure you aren’t committed to a contract that won’t work out in your favor.

Tips For Submitting An Offer

Even though it may be better to submit an offer on a property without an active contingent or pending status, you may feel like you’ll miss out if you don’t try. So if you decide to move forward, here are a few tips to help you submit the best offer.

Enlist The Expertise Of Your Real Estate Agent

First and foremost, you’ll want to connect with an experienced real estate agent who can help you gain insight into the property. They can give you their expert opinion about the property and the best way to go about submitting an offer.

They can then contact the listing agent to give you insight into areas in the contract that may be contingent. You can use this information to your advantage when submitting an offer.

Additionally, you may want to do your own research. Drive around the neighborhood and learn about the community. You may never need this information, but you never know if it will come in handy.

Write A Personal Letter

If you’re 100% sure this property is the home of your dreams, you may want to contact the seller. Try sending a handwritten letter explaining why you want the house and what you have in store for the property.

Sometimes a human connection can be a significant factor when the seller is contemplating their decision.

Don’t Be Overly Aggressive

If a buyer is too pushy, it can deter the seller from moving forward with their offer even if the first offer falls through. However, you do want to respond to calls and emails promptly. Staying on top of your offer can work to your advantage. Persistence and patience are the only way to go in this situation.

The Takeaway

Unless you’re absolutely in love with a property, you may want to only look at homes without an active contingent or pending status. Doing so will save you the time and frustration of waiting for the other offer to fall through. But if you have found your dream home and it’s listed as pending, don’t worry – you may still have a chance.

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    Hanna Kielar

    Hanna Kielar is an Associate Section Editor for Rocket Companies focused on personal finance, recruiting and personal loans. She has a B.A. in Professional Writing from Michigan State University.