In the world of real estate, you may come across properties marked as “contingent” or “under contract.” Both terms signal that a buyer has made an offer and the seller has accepted it—but what do these terms really mean, and how do they affect the buyer and seller? For anyone new to real estate or those simply looking to understand how these terms play a role in the buying process, understanding contingent vs under contract can help you make more informed decisions.
This article will explain these terms in-depth, discuss their key differences, explore whether you can still make an offer on these types of homes, and clarify other related concepts like “pending.” Let’s dive in!
What Does “Under Contract” Mean?
When a property is under contract, it indicates that the seller has accepted an offer from a buyer, and both parties have signed a purchase agreement. However, this doesn’t mean the deal is sealed just yet. An under contract property is still in the process of being finalized.
In this stage, there are several steps that need to be completed before the deal can close. These typically include:
Home Inspection: A thorough evaluation of the property’s condition, looking for issues that may need repairs or could affect the value.
Appraisal: A professional’s estimate of the home’s market value, which the lender may require before granting a mortgage.
Financing Approval: The buyer’s lender needs to approve the mortgage loan, ensuring they have the necessary funds and documentation.
Title Search: Verifying that the seller has clear ownership of the property and no unresolved legal issues.
Once these steps are completed, the property moves toward the closing phase, where all the paperwork is signed, and the buyer officially takes possession of the home.
Although an under contract property has passed several important milestones, it isn’t guaranteed to close. Issues can arise—perhaps the home fails the inspection, the appraisal doesn’t match the asking price, or the buyer struggles with financing. These are all situations that could lead the deal to fall apart, even if the property is under contract.
What Does “Contingent” Mean?
A contingent listing also means that the seller has accepted an offer. However, the sale is still dependent on certain conditions or contingencies that need to be met before the transaction can proceed.
Some common contingencies include:
Home Inspection Contingency: The buyer can walk away from the deal if the home inspection reveals significant issues that need to be addressed.
Financing Contingency: If the buyer is unable to secure financing, the deal can be canceled without penalty.
Appraisal Contingency: If the appraisal comes in lower than the agreed purchase price, the buyer may be able to negotiate the price or walk away from the sale.
Sale of Buyer’s Home Contingency: This allows the buyer to make the deal contingent upon the sale of their current home.
In the contingent phase, the property is still in a state of uncertainty. The buyer is legally allowed to back out of the contract if the contingencies are not met, which can result in the home returning to the market. For sellers, this can be frustrating because although the home is “under agreement,” it’s not guaranteed to sell until all contingencies are resolved.
If the buyer doesn’t back out, and all contingencies are satisfied within a specific timeframe, the property will move toward closing. But until then, it’s still uncertain.
Contingent vs. Under Contract: Key Differences
Though both terms indicate that an offer has been accepted, there are notable differences between a property being contingent and under contract. Understanding these distinctions can help you as a buyer or seller make informed decisions about your next move in the transaction process.
Contingent Properties:
The sale depends on specific conditions being met.
The buyer has the option to walk away without penalty if the contingencies are not fulfilled.
The property may still be shown to other potential buyers, and the seller may continue to receive offers as a backup.
Contingent properties are more likely to fall through, particularly if the buyer struggles with financing or the home inspection reveals major issues.
Under Contract Properties:
The buyer has generally waived or met all contingencies, and the property is nearing the final stages of sale.
The deal is more likely to proceed to closing, though complications can still arise.
Properties under contract are typically not shown to other buyers, and backup offers are rarely considered.
If the deal falls apart, it’s usually due to issues discovered during the final stages of inspection or financing.
Understanding these differences can help you make a more strategic decision when considering whether to place a backup offer on a contingent home or whether it’s worth waiting for a property under contract to potentially fall through.
Can You Make an Offer on a Contingent or Under Contract Home?
It’s possible to make an offer on both a contingent and an under contract property, but your chances of success vary based on the status of the home.
For a contingent home, submitting a backup offer is relatively common. Because the transaction isn’t final, the seller may consider other offers in case the buyer backs out. If all conditions are met and the deal moves forward, the backup offer might not be needed. But if the deal falls through due to unmet contingencies, your backup offer may move to the front of the line.
However, for an under contract property, making an offer is less likely to be successful. At this stage, the seller has already entered a legal agreement with the current buyer. The seller may be open to receiving backup offers in case the deal falls apart, but unless the buyer’s contract fails—typically because of issues like financing or a failed inspection—the seller is unlikely to entertain new offers.
In short, you have a better chance of submitting an offer on a contingent home and securing a backup position. For under contract homes, your options are more limited unless the deal hits a snag.
What Does “Pending” Mean?
If you’ve been following a property that is contingent or under contract, you might eventually see it marked as pending. This indicates that the home has passed through all contingencies and is now in the final phase of the transaction.
A pending home means that all conditions of the sale have been met—such as the buyer’s loan being approved, the home passing inspections, and the appraisal being completed—and the sale is set to close in the near future. At this point, the property is essentially off the market.
Pending properties are typically not shown, and the buyer and seller are just awaiting the closing date to finalize the transfer of ownership.
Pending status represents the final step before a home is officially sold, so if you’re eyeing a property that’s pending, you may have missed your chance unless something goes wrong with the transaction.
Conclusion
The terms contingent vs under contract are critical to understand when navigating the real estate market. While both terms indicate that an offer has been made and accepted, the processes and level of certainty behind them are different. Contingent homes still have conditions to fulfill, making them more uncertain, whereas under contract homes are closer to closing and are less likely to fall through.
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Frequently Asked Questions
Can you make an offer on a house that is contingent or under contract?
Yes, you can submit a backup offer on a contingent home. For an under contract home, it’s less likely, but you might still get a chance if the deal falls through.
Which is closer to closing: contingent or under contract?
Homes marked as under contract are closer to closing, as most contingencies have been satisfied.
Does contingent mean the deal will fall through?
Not necessarily. Contingent simply means the sale is dependent on certain conditions being met. If these are fulfilled, the deal can proceed as planned.
