02 Jun Contingencies, Kick Outs and Other Jargon – Understanding the Language of the Multiple Listing Service
Search the multiple listing service for your dream home, and you will encounter a host of confusing jargon. From “CONT” to “CNTG,” “KO” to “NO KO,” the MLS is full of abbreviations that tell buyers whether a listing is active, under offer or available only in certain circumstances. Understanding the abbreviations means that a buyer can focus his efforts on a home that is genuinely for sale rather than one that is well on its way to closing.
Homes sales and contingencies
When a buyer makes an offer, he either asks for contingencies or he does not. Contingencies are conditions that must be satisfied before the buyer will agree to close the deal. In most cases, the buyer will ask for a financing contingency and a home inspection contingency. The first lets the buyer back out of the deal if he cannot obtain mortgage finance; the second lets him void the contract or renegotiate the price if a home inspector uncovers major repair issues. On rare occasions, a buyer will make a offer with no contingencies. This typically happens in a hot seller’s market where the buyer is paying all cash. In that scenario, the property is listed as “CONT” – for contract – in the MLS. Neither party can back out of the deal without violating the contract. For home seekers, “CONT” means the property is as good as sold.
Contingencies with no kick out
Industry-standard contingencies such as the ones described above let the buyer cancel the contract if she cannot make good the contingency in the manner described in the contract. For example, the contract might allow the buyer 5 days to make a loan application and 30 days to secure full loan approval. In most cases, the seller has no hand in this process. He cannot cancel the contract unless the buyer does not uphold her end of the bargain. In real estate jargon, the seller cannot “kick out” the buyer; only the buyer may cancel the contract. When the seller accepts an offer of this nature, the MLS describes the property as “CNTG/NO KO” – under contract with contingencies but no kick out.
Seller kick outs
Some contingencies are hard to limit in time. The classic example is a buyer who needs to sell his existing property before he can buy the seller’s home. Neither the buyer nor the seller can predict how long it will take the buyer to sell his home. Obviously, it is unfair to expect the seller to wait around forever for the buyer to receive an offer. In this scenario, the seller might accept the buyer’s offer but introduce a “kick out.” At this point, the property enters the MLS as “CNTG/KO” – the property is under offer with contingencies but subject to a seller kick-out clause.
A property listed “KO” is still being actively marketed for sale. If a buyer comes along with a good offer – one that is not dependent upon the buyer selling his home – the seller can ask the first buyer to make good the contingency in the contract. The first buyer has a very short period of time – typically 72 hours – to remove the home sale contingency whether he has sold his home or not. If the first buyer cannot remove the contingency, the seller can “kick out” his contract and enter into a contract with the second buyer.
Properties worth looking at
From a buyer’s point of view, properties marked “CONT” or “CNTG/NO KO” are as good as sold. The seller has entered into a contract and can cancel it only if the buyer violates the agreement. A property listed “CNTG/KO” is still for sale. Make a decent offer, and you may be able to steal the property from the original buyer with acceptable terms.