7 Apr 2013

What does Contingent status mean?

We get this question a lot and it’s understandable that this status is unfamiliar. In the period of Real Estate where short sales started to gain a lot of momentum, Sandicor created this new status for short sale listings. Short sale is a situation where the seller owes more to their lender(s) than the home is worth in today’s market. If the home was to be sold in today’s market the seller would be “short” at the closing to pay off all the lien(s) on the property. Therefore the seller has to wait for the lienholder(s) to approve the short sale, making it Contingent upon approval by the lienholder(s).

In a Short Sale, the owner of the property gets to decide which offer he wants to accept to send to the lienholder(s) for short sale approval. This acceptance is not quite binding yet since it is subject to the lienholder’s approval allowing for a Short Sale. The status in the MLS will show Contingent since the escrow is Contingent upon lienholder’s approval. Compared to a traditional sale (where the homeowner has equity or is bringing cash to the closing table), REO (aka Foreclosure), Probate Sale, or Trust Sale, the property status can be changed to Pending once the offer is accepted by the seller. The Pending status is a indication that the seller and buyer are in a binding contract and have opened escrow. Versus with a Contingent status, the offer is not binding yet since they have to wait for written approval by the lieholders on that property on the terms on the contract.

There could be instances where the Contingent property could be Active again and that can vary from:
1. The buyer waits several months for an approval but doesn’t get any progress. Buyer loses interest and starts looking for a new property. In this case, you will often hear the Realtor explaining that a buyer has “walked”. This is allowed when the agreed upon timeframe on the Short Sale addendum has exceeded (typically it’s 60-90 days from seller’s acceptance).

2.The short sale lender responds to the offer with a counter and the buyer doesn’t agree to the term. Since a binding offer is not until the short sale lender gives a written approval, the sale is still not binding thus the buyer can reject the short sale lender’s counter. The home is back to Active but this time with a remark in the MLS that “Short Sale is approved”. In this situation, it is really great to be the next buyer since you will already know the terms that the short sale lender will approve and you usually do not have to wait that long for an approval since the orginal buyer had already done the waiting for you.

3. The buyer has performed their home inspection, and the home requires extensive repairs that the buyer is concerned with. The short sale bank will not do repairs therefore the buyer decides to cancel.

In a perfect world, if the short sale goes as planned (i.e. offer accepted by seller, short sale lender accepts the offer) then the Contingent status will be changed to Pending status once the written approval is given to the buyer and all parties are in agreeance. An escrow is opened and you’ll be on your way to the closing table.

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