Finding the perfect home is no small challenge for buyers. But it’s common to be left scratching their heads at some of the phrases used by real estate agents and builders when a deal on a property is close to being finalized. Let’s take a look at some of the real estate and mortgage related terms you might hear during the home buying process.
The terms that confuse the most are when we say a sale is “contingent” or “pending”. What do these words actually mean if you’re interested in the property – can you make an offer? Is it still on the market?
The English meaning of each word is straightforward but it is how they apply in the world of real estate is a little more nuanced. This can be frustrating if you’ve been searching for your next home for weeks or even months.
The terms can overlap and are both used when and the owner has accepted an offer, and the sale is proceeding. However, it’s not a done deal.
Let’s look at each of these words as this might help you decide whether to pursue a particular property labeled “contingent” or “pending”.
We’ll start with “pending”: You’ll have seen on real estate portals properties marked as “pending”, or even more confusingly “pending, taking back-ups.”
Effectively, this means the seller has accepted an offer, and it is now the subject of a legally binding contract. However, a seller can instruct their agent to apply one of several variations to the word “pending.”
The phrase “taking back-ups” means the seller is seeking a better offer. So, the door is still open if you wish to express an interest. You’ll need to pay earnest money and option fees for a back-up contract. If the sale does not go your way, then your money is returned.
If you see the phrase “pending” (without any additional wording), then consider the property sold and move on with your search.
Similar subtleties also exist when a seller and their agent use the phrase “contingency”.
As a buyer, you can make your offer contingent on certain conditions. These might include securing your financing, the property meeting an appraisal value, or the home passing certain benchmarks like wood destroying insect (WDI) and home inspections.
You could even ask that your purchase is contingent on the sale of your existing home. The seller doesn’t have to accept this or any other request, but everything is negotiable. This is one of the harder contingencies in a seller’s market, because sellers are often looking at multiple offers and probably some that are over market value – meaning the “uncertainty” of whether your contingent home sells or not can make your offer a lot less attractive to a seller with other offers.
If a homeowner accepts your conditions, they might not take the property off the market.
So, when a property is marked “contingent” on a website, it might mean the agent can continue to show the house, but not always. There are occasions where the buyer and seller agree the sales process should stop. Here in San Antonio, you’ll often see this denoted with “active RFR” or “right of first refusal.”
Another variation is the “short sale” contingency. This is where the seller accepts an offer, but it’s less than the mortgage on the property, and the lender must approve the deal. In this situation, the house is usually no longer on the market.
If you’re interested in a property that has a sale “pending” or “contingent” on buyer conditions, you should ask your agent to approach the listing agent.
Be prepared to make a strong offer because sellers are not always easily convinced they should reject the existing buyer.
If you’re not willing to put down “earnest money” – a form of a deposit – then at least you will have made your intentions clear to the seller and their agent. If their initial deal falls through, they’ll know where to find you.
Of course, you could always buy or build a new home with us to avoid a lot of these issues. Give us a call and let’s talk about it – (210) 924-4265.