Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing What Does Contingent Mean in Real Estate.
When searching for a property, you will commonly see properties that have a contingent status. In this episode, Charles discusses what contingent means, and the different between contingent and pending.
Charles:
Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing what does contingent mean in real estate.
Charles:
Have you always wanted to invest in real estate but didn’t have the time, didn’t know where to find the deals, couldn’t get the funding, and didn’t want tenants calling you? Since 2006, I’ve been buying income producing properties in great locations that provide us with consistent passive income while we wait for appreciation in the future and take advantage of tax laws while we’re waiting. And unlike your financial advisor, we invest alongside our investors in every property we purchase. Check out and invest with harborside.com. If you like the idea of investing real estate, if you like the idea of passive income, partner with us at an invest with harborside.com. That’s invest with harborside.com. When you’re searching for a property, you might come across one that has its status marked as contingent.
Charles:
Contingent means depending on certain conditions. However, within the realm of real estate, it means that the sale of property is dependent on certain contract conditions being fulfilled. A contingent listing signifies that the seller has accepted an offer from a buyer, but is deciding to keep the listing active while they wait to verify that all contract conditions have been properly satisfied. A property buyer will include contingencies in their offer in order to allow for them to receive back their deposit if specific contract contingencies can’t be met. There are five common contingency clauses that homeowners and home buyers will often include in their purchase and sale agreements. Number one is appraisal. If the buyer’s obtaining a mortgage to purchase the property, the lender will typically, if not always require an appraisal, lenders will have the property appraised to confirm that the property is worth at least the amount of the purchase price.
Charles:
If the appraisal comes in lower than expected, the lender could decline the mortgage or they’ll require the borrower to make a bigger down payment. Two is titled a title search will be performed, but to verify that the seller has clear title to the property and that there are no other liens or issues that could impact the buyer’s ownership rights after the sale. Three is inspection. The inspection clause allows potential buyers to hire a professional property inspector or inspectors to perform a complete property inspection. This gives buyers a thorough evaluation of the property’s condition, including a list of necessary repairs and potential problems. The problems list on the inspection report could range from simply an outlet being misfired to more expensive repairs like roof replacement. It is now up to the buyer to request what they would like to be repaired or be credited for from the seller, and what they will handle themselves after the sale.
Charles:
Four is financing. Usually when a potential buyer submits an offer, the listing agent will require a mortgage preapproval letter from the buyer’s lender. Even with a pre approval letter, some buyers are unable to be fully approved for a mortgage. The mortgage contingency is a safety net for the buyer if their mortgage is not approved. Five is home sale. Now, the home sale contingency is when a potential buyer already owns a home, and they’re planning on selling that home and applying the proceeds to the new home they’re looking to purchase. If a buyer finds themselves in the scenario, they can include a home sale contingency into their offer stating that the new purchase will only proceed if they’re able to sell their current home by a predetermined date. If any of these contingencies are not met within the timeframe outlined in the purchase agreement, the buyer is usually able to receive 100% of other deposit back.
Charles:
Any fees they incurred like mortgage application fees or inspection fees are the buyer’s own responsibility to cover. So what is the difference between contingent and pending? Well, contingent means that there are open contract conditions that have yet to be met. Pending refers to a property where all the contingencies have been met by the prospective buyer. Pending status is closer to closing, showing a much higher likelihood as the property will be sold. Since all the hard work and satisfying the contingencies has been completed, and in most situations the buyer’s deposit has become non-refundable, the property is on track to be closed. So what is the difference between contingent and under contract? Well, while we’re speaking about contingent and pending statuses, I thought it would be beneficial to bring up the under contract status in what it means. Now, under contract is before the pending stage and is similar to the contingent stage under contract, simply means that a potential buyer has made an offer and the seller has accepted their offer to purchase the property. All the contingencies still need to be met in order for the sale to continue to closing. So I hope you enjoyed. Please remember to rate, review, subscribe, submit comments and potential show [email protected]. Look forward to two more episodes next week. See you then.
Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.
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