Contingent vs. Pending Explained
In Massachusetts, when you are marketing a seller’s home and procuring a ready, willing, and able buyer to purchase the property, you have hopefully started your journey to a successful closing.
One of the things that Realtors are required to do is change the status of the property when we have a signed contract between a buyer and seller.
Realtors are given one of two options in the Greater Boston Multiple listing service (MLS) when they have a contract. You can either mark the home as contingent or pending.
Maximum Real Estate Exposure explains in detail the meaning of contingent.
It is up to the seller and real estate agent on which way they feel makes the most sense. In most circumstances, deciding which way to mark the status usually comes down to what the Realtor recommends.
Many Realtors just flat-out tell their clients to mark the home as contingent until deep into the home sale process. Doing so is downright foolish! I am in the camp that does NOT give this advice, and here is why.
Most Real Estate Agents Won’t Show Homes Marked Contingent
9 times out of 10, when a buyer’s agent sees a home in the MLS marked as contingent, they will not show it anyway. This makes perfect sense.
Why take the time and effort to show a home that, for all intents and purposes, is under contract?
The only way a buyer could actually purchase the home in a contingent status is if the 1st buyer backs out. Most Realtors don’t want to get a client excited about purchasing a home that, more often than not, is already going to be sold.
The second reason is even more critical to the seller. When you mark a home contingent, the status of the property is technically still considered “current” by MLS standards.
This means that the days on the market continue to elapse when in the contingent status.
Why Are Homes Marked as Contingent in The Multiple Listing Service
The most common reasons for marking as contingent:
- Completion of the home inspection
- Signing a purchase and sale agreement
- Getting a mortgage financing commitment
- Having a home sale contingency
The Realtor must also state why the status is marked as accepting contingent. Some of the most common reasons include signing a purchase and sale agreement, home inspections, or the buyer’s financing commitment.
So here is the rub. Let’s say the Realtor marks your home contingent and gives the reason as the buyer’s financing commitment. Let’s also assume your home has been on the market for 45 days.
Generally speaking, the time needed to get a mortgage commitment from a lender is around 30-45 days from when the lender takes the buyer’s application.
What happens if the sale falls apart when it is marked contingent?
The unfortunate answer is that when your home comes back on the market, the days on market will include all the time that it was marked contingent.
It will show in Multiple Listing Service (MLS) like your home has been on the market for quite a long time!
This is NOT the case if you marked the home as pending status. When a home is marked pending, the days on the market clock stops!
So in the above example, if the home was marked pending and returned to the market, the days on market would read 45 days.
Days on the Market Are Critical in Real Estate Sales
Why is this so important? I have never met a buyer in my thirty-six years in the business that did not ask, “how long has the property been on the market.”
Every buyer wants to know this because it will give them an idea of their leverage when making an offer! When a home 1st comes on the market, a seller is in the driver’s seat. As the market time grows, the seller loses their negotiating leverage.
After a specific time period, buyers will start to mentally ask themselves why this home has not sold. Am I making the right decision to purchase this property?
If two similar homes are on the market, one for 14 days and the other for 200 days, which home do you think a buyer will feel like they can negotiate a better price on?
Believe me; I always ask myself why some Realtors give the advice they do on various Real Estate subjects. This one is a real puzzling to me.
Final Thoughts on Pending vs. Contingent
Do real estate agents mark homes as contingent because they think another buyer will offer a backup contract?
Is it just the herd mentality? Could it be a lack of confidence in their ability to keep a deal together? Is it the seller telling them this is the way they want it to go, and the Realtor just says “OK” without explaining the disadvantages?
Inquiring minds want to know! In most cases, you’re better off putting your home into pending status. The pros of doing so outweigh the cons.
About the Author: The above Real Estate information on contingent or pending in the MLS was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at email@example.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 36+ Years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
Bill your article is interesting because I was always under the impression that marking a property as accepting back up offers made more sense. I had my Realtor do this a few years ago when I was selling my home. Your explanation about the time on the market makes perfect sense! Thinking back to when I was selling my home after we got our offer there were no more showings. If I ever sell again I will be paying more attention to the listing status.