What is contingency?
What is the difference between contingent and pending?
What is a contingent offer/contingent sale/contract contingency?
What is inspection contingency?
What is appraisal contingency?
What is sale contingency?
What is title contingency?
What is financing/mortgage contingency?
In real estate, Contingency refers to a contractual clause or a provision that defines conditions or actions that must be met or completed in order for a contract to become or remain binding.
The term can be applied to various elements of a real estate transaction, such as offer, sale, contract, property, etc.
These two property/listing statuses refer to different steps of the real estate transaction process:
– Contingent means the listing is still active, in that an offer has been made and accepted but conditions still have to be met before it is closed. So the listing remains active, in the event that the contingent is not met and the deal falls through
– Pending means the contingent has been met and the transaction is in progress. The listing is no longer considered active at this point.
This is a frequently encountered term and it refers to the fact that a possible buyer has made an offer which the seller has accepted. However, closing the sale is contingent upon certain provisions that have not been finalized yet. These provisions are usually in place for the protection of both the buyer and the seller’s interest.
For example, the buyer makes and offer which is accepted, but requires an appraisal or a property inspection before committing to buying the property.
On the other hand, the seller has accepted the potential buyer’s offer, but the sale is contingent upon the buyer getting a mortgage approval, so that the transaction can be finalized.
Inspection contingency allows the buyer to have the home professionally inspected. In the event that there are any issues discovered, the buyer can request the issue be fixed, or they can back out of the deal.
Appraisal contingency allows the buyer to have the property independently appraised. If the appraisal does not confirm a property value that is equal to or higher than the buyer’s offer, they can back out of the deal.
If the buyer’s offer on a new property depends on the sale of a current property, the new sale is at risk of falling through if the sale it depends on does not succeed, first.
Title contingency allows the buyer to review a title report on the property, which documents the history of ownership and shows whether the property is clear of liens.
This means the buyer must first get approved for a loan to secure the purchase of the property. The buyer will have a given amount a time, a deadline by which to finalize any necessary procedures and provide the seller a loan commitment letter from a lender. If the potential buyer does not meet the deadline, the seller may choose to move forward with other offers.
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