Maybe you’ve been driving through your favorite neighborhood and you’ve just spotted a home you love. Maybe you’ve been searching online for homes and you were ready to throw in your offer on a favorite. Suddenly, you spot the “under contract” or “pending” sign. 

Your heart sinks because you just lost out on your dream home.

Well, not quite. Just because a home is pending or under contract doesn’t mean that the house is off the market. To better understand your chances to still land your dream home, you’ll need to learn about pending vs under contract.

Real Estate Process Basics

When a home goes up for sale, it’s open to offers from anyone. A real estate agent will upload a home profile online, drive a sign into the lawn, and contact some other agents. 

During this time, the house is open to buyers who’d like to tour and the homeowners are accepting offers. An interested buyer will provide a formal offer either on their own or with an agent. Sometimes, some contingencies come along with the offer.

A contingency is a term that requires action to go through with the sale. For example, the contingency might be that the buyer offers to pay a certain amount for the home, but only if they can secure a loan from the bank. 

The homeowner can consider as many offers as they’d like. It is up to their discretion, advised by their agent, how long they can take to consider an offer and if they will respond with a counteroffer or accept. 

If the homeowner likes a buyer’s offer, they can start a negotiation. Even when the homeowner begins negotiation, they are not required to stop accepting offers from other potential buyers. They can consider as many offers as they’d like and attempt negotiations with anyone.

If the seller and buyer meet the terms and agreements, then a homeowner can choose to accept an offer. How this agreement moves forward, however, will determine what position the homeowners are in when it comes to other offers.

Why Are Contingencies So Important?

If you’re really interested in a home that is already under contract, contingencies are your best friend. Contingencies are the terms in the contract that must be met for the sale to go through. If you really want to buy a house under contract, then you’ll really want the buyer or owner’s responsibilities to fall through.

So what are some contingencies that can cause a contract to falter?

Mortgages

Arguably the most important contingency in a home sale contract is that the buyer secures enough money to buy the home. In most cases, a buyer will need to borrow money to cover such a large expense. In some cases, buyers can offer cash for a home and this can be a huge reason homeowners accept an offer.

Offering cash is a great way to streamline the buying process and guarantee payment. The homeowners won’t have to wait to hear if the buyers secured a mortgage, therefore taking away that risk from the contract. There are also fewer strings to pull, less paperwork, and fewer people that get involved with the sale. 

For the majority of home sales, a mortgage contingency grants that the buyer must secure a mortgage for a certain amount to afford the home. Many buyers will get pre-approved for a mortgage before they put down an offer because otherwise, a homeowner could be skeptical that they can afford the sale.

The homeowner will often put down “earnest money” in an escrow account as their good faith security deposit on the home to enter the contract. If the buyer fails to secure their mortgage, the homeowners can invalidate the contract and keep the earnest money.

Home Inspections

Home inspections are a major step in the home sale process. Pictures, descriptions, and agents can say all they want about how great the home is, but major issues can be lurking beneath the surface. Buyers will want a professional to perform a home inspection to make sure they understand exactly what they’re paying for.

A lot of issues that home inspectors can find will end with major expenses for repairs and replacements. They’ll check everything from termite damage to the age of the roof and water heater. The sellers might then have to fix any structural issues and damage.

The buyers can demand that sellers repair any issues found by the home inspector. Or, they can choose to move forward with the sale as is or ask for a discounted price. It is up to the homeowners to then negotiate with the buyers over a new term on the contract.

In the case that the two sides cannot come to new terms, the buyer gets their earnest money back and the sellers will go back to square one.

Home Sales

Another important part of the process has less to do with the homeowners. For the buyers to move into the new home, they’ll often need to sell their current one as well. Sometimes, buyers are willing to own two homes at once, but most of the time this is impossible financially. 

As a result, a buyer will put into their offer that the home sale is contingent on the sale of their own home. This can be rushed or take a long time, depending on how long both parties are willing to wait for the sale to go through. Generally, the contingency will come with a set time period, and might also require that the sellers are willing to move out of their home within a certain period as well. 

These contingencies can be very stressful and often cause contracts to fall through. Selling a home is never a certain thing, so putting a set time limit on it is risky. A buyer will want to be very confident they can meet this contingency in selling fast before they make the offer.

Otherwise, they’ll lose out on the home and possibly their earnest money, too.

Appraisals

Aside from a home inspection, appraisals are very common in the cases of buyers needing a mortgage. To determine if the buyers can afford a mortgage, mortgage lenders will often hire a third-party professional to appraise the value of the home in question.

The appraiser’s job is to put a market value on the home that is objective and separate from the sale price. The lender compares the appraisal with the sale price and determines affordability. This is how they decide if the investment makes sense for the buyer’s financial situation.

In the case that the appraiser decides the home’s fair market value is lower than the sales price, the buyers might need to go through more effort. They’ll have to look for additional funding because their original mortgage does not cover enough of the cost.

If the buyer is not able to find enough money, the contract is null and void. In this case, the seller can keep the earnest money and put the home back on the market.

Pending vs Under Contract

In all the cases of contingencies above, a home sale can fall through. This is where understanding sale pending vs under contract becomes important. Knowing when the contingencies are set and when they are fulfilled within the contracted period will help you determine if you should still try to buy the home.

The difference between under contract and pending is fairly simple. When a homeowner chooses to accept an offer, they go into a contractual agreement with the buyers. These contracts are usually based on contingencies, such as if a home inspection goes well.

During this period, the home is considered “under contract.” Eventually, the home sale will convert to “pending.”

What Does “Under Contract” Mean?

Sometimes, you might hear that a house is active under contract. This term simply means that the homeowner has accepted an offer from a buyer and that they are currently undergoing the necessary processes to reach the terms of the contract.

During this time, the contract is vulnerable. The offer of money is agreed upon, but the buyer might still need to secure a mortgage and the house will still have to undergo tests such as appraisals and inspections. The buyers might have also requested extra contingencies, such as repairs or replacements of appliances and structural issues. 

If a home inspection turns out bad results, the buyers have the opportunity to back out of the agreement or attempt to change their offer. If the buyers can’t secure a mortgage, the sellers can invalidate the contract due to insufficient payment.

The exact ways a seller or buyer can break the contract will depend on the clauses written into the contract. Each homeowner and buyer must be careful when reading the contract and make certain they can leave if things go south.

What Does “Pending” Mean?

What’s the difference between house pending sale vs under contract, then? When used correctly, pending sale means that a home has been under contract and undergone a home inspection and appraisal. Many of the necessary steps towards completing the contracted terms have been completed and the home is close to being sold. 

In other words, the contingencies in the contract have been fulfilled so there are no more barriers to the buyers taking ownership of the home.

Can You Still Buy A Home If It’s Under Contract?

If your dream home has just been listed as under contract, don’t lose hope. It’s common for homes to at first be under contract but fall through due to contingencies. Many times, a home inspection reveals a huge problem or the buyers can’t secure a big enough mortgage.

During the under contract phase, the home sale is still very new and has not undergone many of the required steps to fulfill the contract. You can even still put your offer out there to see if the homeowners are interested. That way, if the contract falls through, they can choose to consider your offer instead.

Can You Still Buy A Home If It’s Pending?

If you’re comparing active under contract vs pending, then pending is a bit of a less desirable scenario. When a home is pending, it is most likely much further along in the contract. Pending sales mean that the buyers and sellers have fulfilled contingencies in the contract, so the home is very close to selling.

At this point, an agent will be less likely to hear you out if you’re looking to make an offer. It is much less likely that the sale will fall through at this point. Something drastic would have to happen for the contract to be terminated.

If you’re really set on the house, you can always still pass along your contact information. It’s possible, albeit unlikely, that you still have a chance. In the case that it does fall through, you won’t have as much competition and you might be the first one they call.

What Are Backup Offers?

Still interested in putting an offer in on a home that’s under contract? Good news: sellers are allowed to accept backup offers in the case that the original contract falls through. Usually, this means that one backup offer will be chosen out of all the offers to be marked as a priority in the case that the home goes back on the market.

If the house is still considered under contract, you can confidently still communicate your offer to the sellers. This is especially true if the sale is a foreclosure or short sale, as buyers drop out more often in these cases. 

If the house is pending, you can try, but it’s in your best interest to keep looking. 

Make The Move

Have your eye on a great home? Now that you understand pending vs under contract, you know if you can still make an offer on your dream home. You’ll likely also realize that you need to start trying to sell your own home.

iBuyer.com is a revolutionary home-selling service that allows you to buy and sell homes without the hassle of staging, working with agents, or making repairs. Using our service, you won’t have to worry about the complications of contingencies. To find out what your home is worth, enter your address on our platform today!

The post Pending vs Under Contract – What’s the Difference? appeared first on iBuyer Blog.

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In the spring of 2021, a number of news outlets reported that homes were selling faster than ever in the U.S. What is amazing about this is that this record was set despite the fact that both mortgage rates and home prices were on the rise.

If you’re a home seller, this is great news. However, receiving several offers on the first day doesn’t necessarily mean that the length of time between accepting the offer and closing on the deal will move any faster. That is unless you accept a cash offer with little to no contingencies.

Most people purchase homes using financing from a lender. This means that there are a number of steps that need to be taken in a specific order as you move towards the closing. When you’re searching for homes as a buyer, you’ve likely seen listings that have a “contingent” status.

What does contingent mean on a house? What is the difference between a status that says “contingent” and one that says “pending”? Let’s dive into everything you need to know.

What Does Contingent Mean on a House?

If you are like most homebuyers, you typically spend a little time (ok, a lot of time) looking at home listings online. You might notice that next to the listing price, some homes might say that they are “contingent” or “pending” rather than “for sale.”

There can additionally be other information listed here. You’ve probably seen listings that say they are “pending, taking backups” or “contingent, continue to show.”

What does contingent mean on a real estate listing? It means that an offer has been accepted by the seller of the home. However, this offer had at least one if not more conditions or contingencies that need to be met in order for the sale to go through. Until the contingency is met, the listing will still technically be active.

Once the contingencies have been met, the status of the home will switch to pending.

What Does It Mean When a House Is Contingent Vs. Pending?

As opposed to “contingent,” pending means that both parties are moving forward with the sale after the offer has been accepted. This means that you likely won’t want to put in an offer on the home, as the process has moved to the next stage.

The period of time between the resolution of contingencies and the close of the sale is when the transaction is pending. Essentially, the deal is as final as it’s going to be before the money and keys exchange hands.

What Are the Types of Contingent Offers?

There are a number of different contingencies in the world of real estate. However, some of them are far more common than others. Let’s take a look at some of the most common types of home contingencies.

Home Inspection Contingencies

It is common for there to be an inspection contingency when an offer is made on a home. Lenders often require this contingency to ensure that the property is worth the amount of money they will be loaning. This type of contingency means that the parties can’t move forward in the buying process until an inspection has been completed.

Inspections can turn up a number of issues. These can include structural or foundational issues, insect infestations, or issues with asbestos or mold.

Appraisal Contingencies

For people who are using a mortgage to buy a house, it is typically required that an appraisal be done to the property. This is so that the mortgage lender can make sure that the house is at least worth the price of the offer that was accepted.

The appraiser will look for any high-value features, add-ons, or damage that will detract or add to the value of the home. You can end up running into issues if the property is appraised for a lower value than the offer.

Financing Contingencies

If you are going to take out a loan to buy a house, a financing contingency can be a good idea to include in your offer. This offers a way for you to walk away from the deal if you aren’t able to obtain a loan. It can be quite difficult to work with mortgage lenders, and they can deny your request for a loan if anything major has changed since your pre-approval.

Without a financing contingency, you could still be contractually obligated to purchase the home even if you aren’t able to get financing.

Home Sale Contingencies

This is an agreement between the seller and the buyer. In this agreement, the seller agrees to remove the home from the market for a certain number of days. During this time, the buyer will try to sell their own home.

This can be a risky contingency offer and is therefore not as common as the others. In a seller’s market, it is common for sellers to accept offers that don’t have a home sale contingency over one that does. This is because the deal won’t go forward if the buyer isn’t able to sell their own home within a set period of time.

If the buyer isn’t able to sell their own home for any reason, the seller is left back at square one. They likely also missed valuable time on the market during the height of the selling season.

Types of Contingency Status

Real estate agents can mark the status of a contingent deal in a number of ways. Here are some of the indicators you might see on a listing site and what they mean.

Contingent: Continue to Show

This also might be marked as a “CSS” status. Buyers can choose to go this route during the contingency period if they have concerns about the home sale going through. In this instance, buyers can still view the home and make offers.

Contingent: No Show

When a seller is more confident that the offer they accepted will go through, they might choose to stop showings. This also indicates that other offers won’t be made, as showings are typically a necessary step before making an offer.

Contingent: With/Without a Kick-Out Clause

A kick-out clause means that there is a contingency deadline that is in place. This means that the requirements of the deal need to be met within a certain period of time. If there isn’t a kick-out clause, it means that there isn’t a set timeline within which the contingency period is moving forward.

Short Sale Contingent

Short sales are a method for homeowners to sell homes that have a mortgage that is underwater. This means that they are choosing to accept an offer that is less than the amount they still owe on the home loan. This can be a very lengthy process, as the bank is much more involved.

What Are the Types of Pending Sales?

There are also a number of different types of pending sales when it comes to real estate. Let’s take a look at some of the most common ones.

Pending – Taking Backups

If you see this status, it means that the seller does not have total confidence that the offer they accepted will go through. They might be concerned that the buyer is having financing issues or other problems. During this time, you can still place an offer on the property that the seller can accept if their current deal doesn’t end up working out.

That being said, the seller can’t just walk away from the current agreement in favor of a backup offer that is higher. The deal has to fall through on its own for a seller to then go to the backup offers they have.

Pending – Short Sale

When you see this next to a listing, it means that the home is under contract but it is still waiting for approval from the bank. A short sale is a tactic used by property owners to avoid foreclosure. However, each portion of the sale needs to be approved by the bank.

This process is much slower than a conventional sale. It can take a particularly long time for banks to approve each part of the sale. It is common for these deals to fall through during this stage, as the buyer has ample time to find a property that they can close on much sooner.

Pending – More Than Four Months

If a listing has had a pending status for more than four months, the MLS system automatically flags it with a “more than four months” status. The might mean that the listing agent never changed its status to sold. However, it could also mean that the deal is taking much longer than expected to come to a close.

Can You Make an Offer on a Home That Is Listed As “Contingent”?

The best time to make an offer on a house is when there aren’t any pending sales or contingencies. That being said, you can technically make an offer on a home at any point until its status is listed as “sold.”

The second-best opportunity you have to make an offer on a home is when the status states that the sellers are accepting backup offers. For properties that have a non-backup contingency or a pending status, it’s most likely not worth your time to try and make an offer. You can keep an eye on the property to see if the status changes and in the meantime look around for another property that suits your needs.

How to Reduce the Risk of Your Home Sale Falling Through

Selling your home can be a lengthy, stressful, and overwhelming process. First, there is the period of time when you are preparing your home for sale. This might mean repainting, landscaping, making repairs, decluttering, staging, and more. Next, there is a period of time where your house has to be kept in perfect condition for showings and open houses.

(If you’re wondering how to sell your house fast, check out this article.)

Finally, the day comes: you receive an offer! Unfortunately, you are only a few paces down the road to turning over the keys and receiving the check, though.

The mortgaging process slows down how long it takes to sell a house in a major way. However, if you sell your home to a cash buyer, you don’t have to deal with any of these hassles.

Cash buyers, by definition, aren’t working with a mortgage lender. They also commonly buy homes as-is, which means that you don’t have to spend time and money sprucing the place up and making repairs.

Some cash buyers will still want to do an inspection and an appraisal, while others might not. Either way, selling your home to a cash buyer can be a remarkably faster process than selling to someone who is receiving financing. There is also less of a chance that the deal will fall through, as you can verify that the buyer has the funds to make the deal happen.

If you’re interested in learning more about cash buyers, check out this article on iBuyers.

Are You Selling Your Home?

If you’re selling your home on the open market, it can be a bit of a research project. It’s worth learning the answers to questions like “what does contingent mean on a house?” and “what should I expect from an inspection?”

There are few things as stressful in life as waiting for a real estate deal to go through. When you are selling your home, you likely have many other aspects of your life riding on the outcome that the house is sold within a reasonable timeline. If there are issues during the contingency process, it can be disheartening and leave you starting over from square one.

Are you interested in selling your home to a cash buyer to avoid all that nonsense? If so, find out how much your home is worth to an iBuyer today.

The post What Does Contingent Mean in Real Estate? appeared first on iBuyer Blog.

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The U.S. housing market has been somewhat chaotic since the beginning of the coronavirus pandemic. In some locations, bidding wars have been breakout out, with people offering to purchase homes for far more than the asking price.

There is some evidence that the market is cooling off a bit, but it’s still strongly a seller’s market at this point.

If you’re a buyer, this can rightfully make you nervous. Can a seller back out of a contract they’ve signed to sell you their home? If you are a seller, other more attractive offers might make you wonder if you can walk away from an existing deal to take a more appealing one.

Let’s take a look at what you need to know.

Can a Seller Back Out of a Contract?

Can a home seller back out of a real estate contract? Whether you are a buyer that is worried about your purchase not going through, or a seller that is getting cold feet on a deal, the answer to this question is of the utmost importance during the period of time when a house is under contract.

It is actually not uncommon for home sellers to back out of a deal. This is particularly true in hot real estate markets. Sellers can even back out of deals when they don’t have a clear legal right to do so.

Most contracts for a home purchase include provisions that are designed to protect the buyer. If a seller wants to renege on buyers, they typically have an uphill battle to fight. That is, unless the buyer fails to fulfill their duties, such as missing a closing deadline or missing a deposit.

So, even though sellers do back out of deals, it can be a messy process that might not end well for them. There are certain circumstances where sellers can walk away without any negative consequences, but others where they could face some major issues.

For this reason, it’s important to only enter into a real estate contract if you are certain you want to sell a property. In general, the buyer has a number of built-in ways to back out of a deal, while the seller does not have nearly as many options.

(If you’re selling your house, you’re likely motivated to sell it as fast as possible. Check out this article to learn how to speed up the process.)

Why Would a Seller Want to Back Out of Selling Their Home?

There are a number of different reasons why a seller might want to back out of a purchase and sale agreement that they previously accepted. Let’s take a look at some of the most common reasons.

The Seller Can’t Find a New Home

Oftentimes, when a seller is getting rid of their house they are also looking for a new place to live. If they have put their current home on the market and are looking for a new home at the same time, they could find themselves in a position where their current home sells but they don’t find anywhere to move to.

This is much more likely to happen in a seller’s market. This is because it’s much more difficult to be a buyer during this type of market. Someone might have a relatively easy time selling their own home while they find themselves getting outbid in the process of trying to buy a new home.

In order to be able to walk away from a contract without ramifications, the seller’s agent would need to make the sale contingent on the seller purchasing a new home.

The Appraisal Came Back Higher Than the Buyer’s Offer

As a part of the home sale process, the bank has the buyers hire an appraiser. This is a professional who visits the home and uses market data to determine the real value of the home. If the appraisal comes back much higher than the buyer’s offer, the sellers might want to back out so they can try and get a higher price for the home.

Their Life Circumstances Changed

Sometimes, the unexpected happens in life. Perhaps the seller had a death in the family or lost their job. This might mean that they are no longer in a position to sell their house and move out. Sellers might also change their minds about selling a house if there is a disagreement within the family about the topic.

(Are you wondering if you can skip the stage of the home selling process where you shell out a ton of money to doll up the home? Take a look at this article about selling your home as-is.)

They Feel Emotionally Tied to the House

When you own a home and live in it, you inevitably become emotionally tied to it. The property becomes a place that is filled with memories. Perhaps the sellers raised their kids in the home or lived there with a spouse who is now deceased.

Someone might practically decide that selling their home is the right financial decision for them. However, emotions simply aren’t guided by what is practical. After having decided to sign the contract with a buyer, a seller might simply not have it in them to give up the home that is so important to them.

The Seller Gets a Higher Offer From Another Buyer

When you’re selling your home, it’s logical that you would want to make as much money as possible from the deal. So what happens when a seller signs a contract and then receives a higher offer?

In this circumstance, sellers might choose to try and back out of the deal. Whether or not this is possible has to do with specific circumstances.

The Consequences of Backing Out of a Home Sale

If a seller walks away from a purchase contract, they can be sued because they breached the contract. The seller can be ordered by a judge to sign over the deed and complete the sale of the home even though they tried to back out. While the buyer can sue for damages rather than the property, they typically sue for possession of the home.

This can be costly for buyers in a number of ways. They often have to pay the legal fees of the buyers on top of their own.

Sometimes, the seller will also be ordered to:

• Repay buyers for the money they spent on the appraisal and inspection
• Return the good faith deposit that was put down by the buyer, plus interest
• Repay the buyers for reasonable expenses they incurred
• Pay the buyer for lost equity that they could have realized from the home
• Pay the listing agent back for marketing costs and their lost commission

If a seller is hoping to break a contract without dealing with a fight in court, they might offer to give the buyer enough money that they are willing to exit the deal.

Breaching a contract is a matter for civil court. This means that there aren’t criminal penalties for walking away from a contract. That being said, the damages you are ordered to pay in civil court can be substantial.

(Are you wondering if you can sell your home online? If so, take a look at this guide.)

How Can a Home Seller Avoid Penalties?

Adding contingencies to the sales contract is how home sellers can give themselves the opportunity to walk away if they choose to. This means that the sale of the home is contingent on certain conditions.

For instance, a home seller might choose to make the sale of the home upon having a contract to purchase another home. Or they might add a deadline or time frame for all purchase offers.

In general, a seller can’t get away with reneging without cause. For this reason, sellers should think long and hard before accepting an offer on their home. If the buyer didn’t fail to perform or you don’t have contingencies that protect you, you’ll want to be fully committed to the sale.

That being said, sometimes buyers will fail to perform. One common way is not being able to obtain financing. The buyer’s lender might not appraise the home at a high enough value in order for the buyer to secure financing. If this is the case, a seller can walk away without any requirement to negotiate.

If a seller wants to back out of a sale after it has closed, they are simply out of luck. Once the closing has happened, there is no chance of exiting the deal. At this point, the money, title, and everything else has been transferred.

If the seller is hoping to still live in the home for a while after the closing, the buyer might be willing to lease the property to them for a period of time.

When Can a Home Seller Back Out of a Real Estate Contract Legally?

Can a seller back out of a contract before closing legally?

In general, real estate contracts are built to protect buyers and not sellers. That means that it isn’t as easy to back out as a seller as it is for buyers. Buyers can typically walk away if they find something they don’t like during the inspection, if the appraisal comes in low and the negotiations fall apart, or if their mortgage falls through.

There Was a Home Sale Contingency in the Contract

If a seller wrote a contingency of sale into the contract, they can legally walk away if the house they were trying to buy fell through. It’s important to understand that this contingency must be explicitly written into the contract in order for a seller to be able to back out without ramifications.

The Buyer Fails to Perform

If the buyer doesn’t meet the various deadlines that are written in the contract, the seller can walk away. This might mean they don’t perform the inspection within the allotted amount of time or they don’t secure a mortgage in the time written into the contract.

Hustlers or Scams Were Involved

If a seller has been swindled in some way, in extreme cases, a seller might be able to walk away from a sale. As a seller, chances are your circumstance doesn’t qualify as letting you walk away without consequences in this way. However, it does happen.

Do You Want Your Home Sale Process to Be Simple, Fast, and Easy?

Few things in life are as stressful as selling your home. The process drags on, and the buyers have several opportunities to walk away, leaving you at ground zero.

It seems like the buyers are able to back out of a contract much more easily than the seller. Can a seller back out of a contract? The answer is yes, but depending on the circumstances there could be serious legal and financial repercussions and they still might be ordered to transfer the property to the buyers.

If you want your home sale to go smoothly, you might consider selling your home to an iBuyer. These are cash buyers that buy your home as-is, saving you from all of the pre-listing nightmares typically associated with selling a house. You don’t have to deal with showings or open houses, and the whole deal can be over and done much faster.

Are you wondering how much your home is worth to an iBuyer? Get your home value and a no-obligation cash offer here!

The post Can a Seller Back Out of a Contract? appeared first on iBuyer Blog.

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Buying and selling a house is not exactly a straightforward process. From the moment you contact a seller up until the final signature, the listing will go through some steps. There are two listing states people stumble over: the contingent and pending status.

But what do these statuses mean? How far from closing the deal are you when the house of your dreams moves to one of these stages? After reading this article, you’ll know exactly what happens at each of these stages. Let’s dive in!

The Difference Between Contingent and Pending Real Estate

Understanding the contingent and pending states, as well as the distinctions between them, will assist you in identifying opportunities that others may overlook. The difference between the two lies in where the listing is placed in the selling process: 

The Contingent State

In real estate, “contingent” means the seller has accepted your offer with conditions, or criteria, that must be satisfied before the transaction can close. If you cannot fulfill the stipulations, the seller can cancel the contract. Since this circumstance could reset your house sale, the contingent state is not the best state for you as a buyer. Multiple reasons can lead to a contingent state:

• Appraisal contingency: You don’t want to pay a property more than what it’s worth except when the market is hot. Mortgage lenders may demand an appraisal to make sure that the property isn’t overpriced. The appraisal contingency states that a property must be appraised at the sale price or higher for a deal to continue. You are allowed to ask for a lower price or to back out of the deal if the home appraises for less than the sale price.
• Home inspection: As a buyer, you may want a house inspection contingency, which gives you additional alternatives after the inspection. After the inspection report is provided, you have the option to simply terminate the contract if you are unable to adequately negotiate the fixes you need, or if the examination finds a bigger underlying issue that you are unwilling to deal with.
• Mortgage approval process: While your mortgage isn’t approved, the listing will remain contingent. If you cannot get the home loan or mortgage required, this contingency will either give you time to seek alternative financing choices or allow you to walk away from the contract entirely.
• Sale of buyer’s home: Although selling first makes sense in most instances, time and finance don’t always align. This clause helps you to make sure that you have time to sell and settle your current house before buying a new one. For example, if an existing house does not sell for the asking amount, the buyer may back out without legal repercussions. House sale contingencies may be problematic for the seller, who may have to reject another offer until the contingency is resolved. The seller may terminate the contract if your house doesn’t sell within a certain time frame.
• Legal contingencies: During the house purchasing process, an attorney or title firm will search the property’s title. The title is a record of ownership and is required for selling. Most title problems need to be addressed before closing. In certain cases, the seller may not be able to legally establish ownership of the property. A title contingency protects you by enabling you to walk away if problems are not addressed before closing.

So, the listing remains active while under the contingent status and the seller may still accept other offers. Once all contingencies are met, the property will move forward to the pending state.

The Contingent Statuses

While being under a contingent state, the listing can have different sub status, informing you of the remaining possibilities regarding this home. Here are three of the most common statuses:

CCS – Continue to Show

A listing with the status Contingent – Continue to Show, or CCS, indicates that the seller has chosen to acknowledge offers from other expected purchasers while maintaining the status quo. 

Contingent – No Show

In a Contingent – No Show situation, the seller has chosen not to display the property any longer or to acknowledge any new offers, even though all contingencies have not been satisfied. 

Short Sale Contingent

It is the point at which the vendor has demonstrated that they are willing to accept less money than the amount owed on the mortgage. It can take a long time to complete a short-deal transaction interaction. 

Kick-Out Clause

In the home sale contingency period, a seller who accepts an offer with a kick-out clause has more leverage (the period during which the contingency must be met). Some sellers may use other contingencies, such as the financing contingency, to show that you are unable to purchase the property. The original contract will be voided, allowing the seller to negotiate with the higher bidder. 

The Pending State

When a house is scheduled to close and all contingencies have been met or waived, its status is changed to “Pending”. At this point, you are very close to making the deal. All the contingencies are met and nothing is holding you from proceeding to the sale, except the remaining paperwork and legal work that may take some time to get done. But as the sale is not complete, the seller can still decide to accept backup offers.

The Pending Statuses

Once your property’s listing is in a pending state, it can have different sub statuses.

Pending – Taking Backups

This status indicates that the seller is still accepting backup offers for this property.

Pending Short Sale

When an offer that’s accepted is defined as a short sale, the property is going through the last steps of the process with the mortgage holder. With the Pending Short Sale status, the seller may not receive new offers and the listing is no longer active.

Pending, Release/Continue to Show:

The seller accepted your offer, and contingencies have been met. But a “kick-out clause” remains for you or the seller. The seller can still show and accept offers.

Pending – More Than 4 Months

When an accepted offer has been on hold for more than four months, the MLS applies this status automatically. This could be a sign that something about the sale transaction is taking longer than expected. It may also be that the listing agent forgot to change the status from Pending to Sold after closing.

Can I Buy a Contingent Property?

It’s not too late to make an offer on a contingent listing. The property might have acquired this status because the buyer does not meet all requirements. This could be your chance to make a stronger offer and take the first place. If your offer is compelling, the seller’s agent will want to speak with you. A quick conversation between the professionals will probably reveal the deal’s viability. Remember that sellers who accept a contingent offer without a “kick-out clause” may not be able to back out. 

Can I Buy a Pending Property?

The short answer is yes, as pending does not mean sold. As we’ve seen above, at this point the seller may still accept backup offers. So if this house seems to be the one, it’s worth making an offer. Yet, your offer needs to be rock solid. The seller at this stage is unlikely to be willing to take risks by accepting offers with too many contingencies. Therefore, make sure you are financially strong enough to close the deal.

How To Place An Offer on a Pending or Contingent Property?

The best way of doing it is to contact your real estate agent. Then, make sure you follow our tips to put all the chances on your side

1. Be strong financially. Present a complete offer, including mortgage pre-approval and proof of funds. Offer more than the asking price if you can.
2. Show flexibility. Demonstrate that you are not in a rush. Don’t make every comma in the contract mandatory. Allow the vendors additional time to pack their belongings, for example. This has the potential to have a significant influence.
3. Send a letter. The good old letter can make the difference and pique the sellers’ interest.
4. Remain available. You want the seller to be aware that you’re ready to move as soon as they are. Keep in touch with your agent regularly to ensure that you remain on their radar if anything changes.

Get An Offer On Your Home Now

Not everyone is a real estate agent, and selling a house can be a complicated matter. That is why iBuyer does the job for you, by finding you the perfect match for your property.

Head now to our iBuyer tool, designed for home sellers. With your home address and a few more details, we will calculate the value of your house and find you a iBuyer within minutes, with a no-obligation cash offer.

The post Contingent vs Pending: What’s the Difference? appeared first on iBuyer Blog.

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In 2020, sales of existing homes were at their highest point since 2006. Demand for houses was driven by the coronavirus pandemic, and the market was (and still is) highly competitive in many places due to low-interest rates and low inventory.

If you are buying a home for the first time, the whole process can seem a bit foreign. For most people, buying a house is the biggest financial purchase they will ever make. Given that, it’s no wonder that the process of making offers on homes can be stressful and overwhelming.

If you’re planning on making an offer on a home, you’re probably wondering: how do counter offers work in real estate?

Understanding how the negotiation process works can help you navigate purchasing a home in a way that is most advantageous to your needs. Let’s explore what you need to know about counter offers in real estate.

What Is a Counter Offer in Real Estate?

When a buyer is interested in a home and wants to purchase it, they make an offer on the home, typically with the help of their real estate agent. In this scenario, the seller has three options:

• Accept the offer without making any conditions or changes
• Present a counter offer
• Reject the offer and continue looking for a buyer

If a seller is interested in negotiating with the buyer but rejects the offer they initially made, they can make a counter offer. Counter offers pretty much always deal with three main factors: convenience, price, and timing.

In the next section, we’ll take a look at these factors and what they mean in greater detail.

How Do Counter Offers Work in Real Estate? Why Do People Counter?

It isn’t uncommon for there to be some back and forth in the negotiation process when buying or selling a house. When you make an offer on a house, there is a good chance the sellers will counter unless the market is heavily weighted towards buyers.

When a seller makes a counter offer, the changes are typically in regards to certain aspects of the offer. Let’s take a look at some of the common components of counter offers.

Sales Price

The most frequently contested part of a counter offer is the sales price. There are two common ways that sellers will counter in this regard.

First, a seller might counter with the original asking price. This indicates that they aren’t willing to negotiate on the price.

In the second case, a seller might counter with a price that falls between the asking price and the buyer’s offer. This indicates that the seller is willing to negotiate. The buyer can make another counter offer or they can accept the proposed price.

Closing Costs

Sometimes, a buyer will request that the seller helps to cover the closing costs. However, this is much more common in a buyers market. The seller might agree to put a certain amount of money towards closing or they might simply say no.

Closing Date

The original offer will propose a date for the closing. A seller might make a counter offer if they would like to have the closing happen on a different date. For example, they might need more time to move out of their house and request that the escrow period is longer than stated in the initial offer.

Earnest Money Deposit Amount

Buyers typically put down an earnest money deposit to show you that they clearly intend to purchase your home and that they have cash on hand. Sellers are motivated to have larger deposits because it indicates that the buyer is more likely to follow through, as they have more at stake.

Buyer-Requested Contingencies

There are standard contingencies in home offers, such as appraisal, inspection, financing, and title contingencies. Sellers don’t usually fight these contingencies unless they have a significant amount of leverage.

However, some buyers will put a home sale contingency in their offer. This means that the purchase of your home is contingent on their ability to sell their own. Sellers might push back on this and try to negotiate with a kick-out clause or other methods.

(Would you rather avoid this lengthy negotiation process entirely? If so, you might be interested to learn more about what iBuyers are and whether or not selling your home to an iBuyer is the right option for you.

How Does a Seller or Buyer Accept a Counter Offer?

When both the buyer and the seller have reached an agreement, they will both have to sign the contract. These days, this commonly occurs using an online electronic signature tool. In order to lock in the offer, this needs to happen immediately as offers typically expire.

When Should You Accept a Counter Offer?

You want to be ready to move quickly if the seller issues a counter offer. Counter offers usually have an expiration date, just like the purchase offer you made.

There are a number of things you will want to consider before accepting a counter offer, though. While price is often the first thing people look at, it’s not the only important part of the counter offer. You will want to look at any changes that were made to the timeline, contingencies, or closing cost payment agreement.

It’s important to never let negotiations get impacted by your emotions. For buyers, they can get emotional if they are convinced that the property is their dream home. Sellers can become emotional when they feel offended by a low-ball offer or other parts of the offer.

(Are you hoping to sell your house fast? Check out this article.)

What Should You Do If the Seller Rejected Your Counter Offer?

It is not required that sellers reject an offer in writing. The listing agent might choose to tell the buyer’s agent that the seller isn’t going to respond because the offer isn’t acceptable. The seller can also return the offer writing “rejected” across the face with the date and their initials, and there is often also a spot where sellers can deny the offer on the contract.

During this stage of buying a home, your best resource is your real estate agent. They will be able to talk to the seller’s agent and find out what it is that the sellers find most important about the home sale. They might not want to make repairs, they might be firm on their price, or they might have a move out date that is set.

Can the Seller Counter Above Asking Price?

It might sound strange, but in some situations, the seller can counter above the asking price. This would only be justifiable in certain situations.

Usually, this only works when sellers have received multiple offers. This is more likely to work in a seller’s market and less likely to work in a more balanced market or a buyer’s market.

It’s important to understand that countering at a higher price can be risky if you aren’t sure that the property will appraise for that amount. The buyer otherwise won’t be able to be their financing approved and the deal could fall through entirely.

Can You Withdraw Your Counter-Offer?

If you are making multiple counter offers at a time, you don’t want to counter anything in writing but you do want to send out a multiple-offer disclosure. Counter offers, instead, are made verbally.

This way, the first buyer who gets back to you with terms you like can enter a contract with you.

Basically, this means that you can withdraw a counter offer. But, the counter should be verbal and not written and you should make sure that your agent is doing everything right to allow you that option.

(Are you wondering whether you can sell your house without making any repairs or changes? Learn about selling your house as-is here.)

Can the Seller Make a Counter Offer in Real Estate When the Initial Offer Was Full Price?

If you make an offer at the full asking price, it’s reasonable to expect that the seller won’t counter on the basis of price alone. Normally this wouldn’t happen unless the market was heavily favoring buyers and the seller had multiple offers.

That being said, it’s not uncommon for a seller to counter on other aspects of the deal.

Can the Seller Issue Multiple Counter Offers to a Number of Different Buyers?

If a seller receives multiple offers, they can verbally make multiple counter offers. However, they need to be careful in doing so. It’s important to carefully follow the law when it comes to how you can navigate making a number of different counter offers.

In this scenario, the seller will not want to give any written counter offers. In some states, the buyers must be told in writing that the seller is considering several different offers. In other states, the law does not require sellers to inform buyers that there are a number of different parties involved.

Sellers do need to be somewhat careful doing this. Buyers could find the situation too risky and look elsewhere for a more predictable deal.

Responding to a Counter Offer

Whether you are a buyer or a seller, you will want to carefully review each and every aspect of a counter offer. No matter how many times you and the other party go back and forth negotiating, you will want to read every detail before you sign anything.

It’s important to understand what your limits are before you start negotiating. If you are the seller, decide what points of the agreement you are willing to negotiate on and which you are firm about. For example, you might not have any room to budget when it comes to your move out date, but you might find that you are willing to come down on the price a little.

If you are a buyer, you will want to think about what your maximum price is. It’s easy to get emotionally attached when you are shopping for a home. In a competitive market, it’s not uncommon for individuals to end up with buyer’s remorse because they felt so rushed to make a very large financial decision.

It is definitely worth consulting with your real estate agent during this process. Negotiations can be difficult and stressful, and having a professional agent to help you understand the offer and make a counter offer can make a world of difference.

Are You Ready to Sell Your Home?

Selling your house can feel like a never-ending process. First, you have to get your house ready for the market by cleaning, painting, landscaping, and making repairs. Your home will likely be staged for photographs and showings, and your life is constantly interrupted by people viewing your home.

You’d think that it would be smooth sailing once you get an offer on your house, but unfortunately, that’s far from true. Once you get through the negotiation process and accept an offer, there are many more steps before the sale is final.

Understanding the answer to questions like “how do counter offers work in real estate?” can help you get a sense of what it’s like to sell a home. For people who aren’t interested in this lengthy endeavor, there is another option.

Selling to an iBuyer is a quick, stress-free process. If you don’t want to deal with the normal headaches of selling a house, this is a reasonable path to consider. You can find out the real value of your home and get a no-obligation cash offer here!

The post How Counter Offers Work in Real Estate appeared first on iBuyer Blog.

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