After months of searching, you’ve finally found your dream waterfront home in Maryland. It’s a thrilling moment filled with excitement and hopes for the future.
Unfortunately, this sense of excitement soon turns to disappointment when you spot the “pending” or “under contract” sign attached to the property.
You assume your chance to own your dream home has passed you by. But that perfect property could still be yours! You might not know it, but terms like ‘under contract’ doesn’t guarantee the property will actually go to settlement.
There is still a chance you could be the happy buyer but, before taking action, you’ll want to know how to differentiate between standard real estate terms to fully understand the situation surrounding your potential new home.
What’s the difference between pending and active under contract?
One of the most common questions the Mr. Waterfront Team receives is, “what is the difference between pending and active under contract (A/C)?”
Although the terms have related meanings, there are some differences.
When a home is “active under contract,” the seller has accepted a buyer’s offer on the property, but there may still be contingencies to be satisfied before the contract becomes pending. When a contract has been signed between the two parties, the status of the home changes from “active” to “active under contract” or “pending” depending on whether the seller is still accepting showings and back-up offers.
When a property is pending, it is firmly under contract, and there are no longer any contingencies left on the sale. Once a home is listed as pending, the odds are low that other buyers will get the chance to purchase it unless something significant happens before settlement.
Even though this seems pretty definite — and often is — it’s essential to understand that the sale of the property is not yet completed. If you discover a home you love that is under contract; you don’t have to give up on your dream of owning it yet.
Can you put an offer on a house that is under contract?
Yes, you can put an offer on a house that is under contract. This is where the term “backup offer” comes in.
Active under contract is an early stage in the home buying process, and there may be an opening for a second buyer to move into first position. If the first offer falls through during the contingency process and you have ratified a backup offer, your offer would become primary.
Research has found that 4 percent of overall home sales fail. So, although the vast majority of sales do close, there is still a small chance the deal could fall apart.
What does contingent in real estate mean?
In real estate, contingent means an offer on a property is accepted but specific criteria must be met before the property goes to settlement.
For example, buyers may include a mortgage contingency in their contract with a seller. This means the buyers’ offer is only valid if they get approved for a mortgage loan within a certain period. Another contingency may be a County-issued permit if the property for sale is a lot or if it doesn’t yet have a pier.
If contingencies in the contract are not met, a contingent-listing home could return to the market and become available for purchase again.
Contingent offers protect buyers from being locked into a sale when serious issues arise; contingencies are not to be used as a tool for re-negotiation on price.
Are there common home-buying contingencies?
Yes, there are. Many types of contingency clauses can be added to a real estate contract. Let’s take a look at the most common ones:
An appraisal contingency may allow buyers to back out of a contract if the property doesn’t appraise for the amount they offered to pay. More often, buyers will negotiate a new sales price with the seller if the home does not appraise for the full value.
This contingency appears in contracts to help make sure the buyer will be paying the fair-market value of the home, particularly if there is a loan involved. In a red-hot sellers’ market, however, savvy buyers often waive this contingency to get ahead of the competition.
Home Inspection Contingency
A home inspection contingency is a contract clause that allows a buyer to have the property inspected. This way, they can evaluate its condition before the contract becomes pending. Types of inspections may include structural and mechanical, mold, septic or wastewater system, chimney, pier, etc.
The home inspection is specifically not to be used as a re-negotiation of price, but if there are major surprises to the buyer it is certainly a point of discussion with the seller.
Financing, or mortgage contingency, provides the buyer protection if they are unable to secure financing within a certain period of time. This length of time varies, but typically lasts anywhere between 30 and 45 days.
Home Sale Contingency
When a home sale contingency is in place, the buyer has a specified amount of time to sell and settle their existing home before moving forward with the purchase of the new one.
If the buyer’s home is not sold within the specified number of days, the seller retains the right to cancel the contract.
Now that you understand the key differences between common home sale terms, you can confidently make a move on a home you love, even if it appears someone has beaten you in timing.
The Mr. Waterfront Team of Long and Foster is here to help you further navigate these statuses as we inquire about homes that are under contract on your behalf. We’ll keep you regularly updated on how things are progressing.
If you have any further questions, reach out to us, we’d love to help.