What does contingent mean on house sale

In today’s competitive real estate market, homes in Southern California and across the country are entering escrow faster than ever. Sellers are often receiving multiple offers within days of listing and bidding wars between buyers then ensue.

Once a home is in escrow, it is marked on the Multiple Listing Service as either under contract, contingent, accepting backup offers, or pending. But what do all these mean?

Under-Contract

Any home that has accepted an offer is officially in escrow and marked as under contract in the MLS. This is a blanket term that encompasses contingent, accepting backup offers, and pending.

Contingent

If a listing is marked as contingent, it means that the sellers have accepted an offer and the property is now in escrow. During the initial period of an escrow, the buyers of the property conduct their inspections, review seller disclosures, review any documents related to the property, and obtain a loan if applicable.

Essentially, the deal is contingent on the buyers completing their due diligence and moving forward by releasing their contingencies. This is usually resolved by:

• The buyer being satisfied with the condition of the property and releasing contingencies
• The buyer renegotiating based on findings with either a request for repair, a request for credits, or a reduction in price. This can be countered, rejected, or accepted by the seller.
• The buyer cancelling escrow based on their findings and the seller returning any earnest money deposits.

This does not apply to a non-contingent offer. An “as-is” offer still allows the buyer the agreed-upon time to investigate, however, the seller’s position states that they will make no concessions. Buyers can still attempt to renegotiate an as-is transaction based on their findings.

Accepting Backup Offers

This term is the same as contingent.

During the initial buyer investigation, most listing agents will continue to show a property for backup offers. Secondary buyers can submit an offer and if the seller accepts, they are then in a backup position. If the first buyer cancels, the second buyer will automatically enter escrow on the property.

Reports from the previous escrow are delivered to the new buyers who can choose to bring in new inspectors as they see fit.

Pending

Once a buyer releases all of their contingencies – physical, loan, and any others – a property is pending sale.

The buyer releasing these contingencies also releases their earnest money deposit, typically 3% of the purchase price, to the seller. While the buyer can still cancel escrow at this point, they would forfeit that deposit and the seller could potentially pursue legal action.

Once a property goes pending, the transaction will likely go through and there will no longer be any backup showings or offers.

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