Pending and Contingent are the two terms used to describe properties that are in escrow or under contract. The majority of the properties that go under contract are classified as pending continue to show. This means that buyer and seller have agreed to terms and escrow has been opened. However, before the deal is going to close, the buyer still needs to go through his inspection period and he may have to go through financing contingencies. The seller of the property is still in a position where he has his broker continue to market the property and do showings. They may accept back up offers on the properties that would become accepted offers in the event that the original buyers cancel the contract. If and when all contingencies are satisfied, a seller may elect to have their home classified as pending do not show. At that point, the seller is not actively soliciting back up offers. Homes that involve cash transactions are more likely to be pending do not show. As long as there is a financing element, there is still some risk that a transaction could fall through up until the loan has been funded by the bank.
The main contingencies for a property under contract are financing and inspection, if there are additional buyer contingencies for the purchase of a property, the seller’s broker may classify a property as contingent with release. Examples of additional contingencies would be the need for a buyer to sell another home prior to completing the sale or the buyer selling some other asset to have enough capital to complete the transaction. These type of buyers are considered a little more risky for sellers. As a result, they will often have something called a 72 hour clause. What that means is that if another buyer were to come along and present a more palatable offer, the original buyer would have 72 hours to remove their extra contingencies. If they do not remove those contingencies, the seller will cancel the original contract and the new buyer would then go under contract.
What does this mean for buyers and seller? For sellers, I think it is important to recognize that properties can and should be marketed to other prospective buyers. Escrows can and do cancel and seeking a back up offer is the best way to protect your interest. Buyer’s should not exclude properties already in escrow from their search. We have had success in the past submitting back up offer for our clients. You never know if and when a deal might fall out of escrow.
