Have you ever come across the terms “Under Contract” or “Pending” when looking through property listings and wondered what they meant? You’re not alone. In fact, we get these questions all the time. So, in today’s article, we’re breaking down under contract vs. pending to help you understand the difference. This is a real game-changer when it comes to buying or selling a property, so pay close attention!
Under Contract vs. Pending: What’s the difference?
These terms often seem interchangeable at first glance, but in the real estate world, they carry distinct meanings. Both signify that a property is closer to being sold, yet each indicates a different stage in the sales process.
What does “Pending” mean?
When a property is listed as “Pending,” it means that all contingencies in the sale process have been met or waived. Simply put, both the buyer and the seller have agreed upon terms, and now the sale is just awaiting the final closing.
During this phase, the property is essentially taken off the market, indicating to other potential buyers that the property is just steps away from being sold. While it’s in the “Pending” status, it’s rare for the deal to fall apart, but it’s not entirely impossible.
What does “Under Contract” mean?
“Under Contract” is a term used when a buyer has made an offer on a property, and the seller has accepted, but the sale is not final yet. During this phase, contingencies like home inspections, appraisals, or financing approvals may still need to be met.
This means there’s a higher chance the sale might not go through compared to a “Pending” status. The property is still technically available on the market, and backup offers can be made by other interested parties, but the original deal must fall through before any backup offers can be considered.
What are the basic steps of the real estate process?
Understanding the real estate process is crucial whether you’re a first-time buyer, a seasoned investor, or looking to sell. Here’s a concise breakdown:
- Property Search: Identify and shortlist properties that meet your criteria and budget.
- Offer Submission: Once you find a suitable property, submit an offer to the seller.
- Contract Negotiation: If the initial offer isn’t accepted, negotiations between the buyer and seller ensue until an agreement is reached.
- Under Contract: After the offer is accepted, the property moves into the “Under Contract” status, where contingencies need to be addressed.
- Addressing Contingencies: This can include home inspections, appraisals, or securing financing.
- Finalizing the Sale: Once all contingencies are satisfied or waived, the property status changes to “Pending,” leading to the closing phase.
- Closing: All necessary paperwork is completed, funds are transferred, and the property ownership is officially changed.
What are contingencies, and why are they important?
In real estate, contingencies are conditions that must be met before the sale of a property can proceed. They act as safety nets, ensuring that both the buyer’s and seller’s interests are protected during the transaction. Here are some common contingencies you may see:
Mortgage Contingencies
This is one of the most common contingencies. It ensures that the buyer can secure the necessary financing to purchase the property. If the buyer can’t obtain a mortgage within a specified period, they can exit the contract without penalties.
Home Sale Contingencies
This allows a buyer to sell their current property before finalizing the purchase of the new one. If they can’t sell within a set timeframe, the contract may be terminated.
Home Inspection Contingencies
This gives the buyer the right to have the property inspected for any issues. If significant problems are identified, the buyer can request repairs, renegotiate the offer, or even back out of the sale.
Appraisal Contingencies
An appraisal contingency ensures the property’s value matches or exceeds the purchase price. If the appraisal comes in lower than the agreed price, the buyer can renegotiate or withdraw from the sale without repercussions.
Can you buy a home that is under contract?
When a home is “Under Contract,” it means that a buyer has placed an offer on the property, and the seller accepted it. However, the deal isn’t finalized yet due to certain contingencies that need to be met.
While the property is technically still available, it’s a bit tricky. Here’s what you need to know:
- Backup Offers: Even if a home is under contract, potential buyers can still submit backup offers. If the initial deal falls through due to unmet contingencies or other issues, the seller might consider a backup offer.
- Increased Competition: Understand that if you’re considering a property that’s under contract, you’re likely not the only one. Other potential buyers might also be eyeing the property, leading to a competitive situation.
- Contractual Clauses: Some contracts may have a “kick-out clause,” which allows the seller to entertain other offers. If a more attractive offer comes in, the original buyer might have a specified timeframe to either firm up their offer or step back.
Can you buy a home if it is pending?
Once a home’s status is listed as “Pending,” it indicates that all contingencies have been addressed and the sale is awaiting the final closing. At this stage, the chances of the property becoming available again are slim. Here’s what to consider:
- Slim Chances: While not impossible, the likelihood of a deal falling apart during the “Pending” phase is low. It signifies that both the buyer and seller are committed and they’re merely awaiting the final paperwork.
- Backup Offers Might Still be Possible: Some sellers might still entertain backup offers during this stage, but it’s less common. If you’re highly interested in the property, it doesn’t hurt to submit a backup offer but set realistic expectations.
- Stay in the Loop: If you’re genuinely interested in a property that’s pending, keep in touch with your real estate agent. They can provide updates on the sale and notify you if, for any reason, the property becomes available again.
- Consider Other Options: Given the reduced chances of acquiring a pending property, it’s wise to continue your property search. Expanding your options can lead you to find another property that meets, or even exceeds, your criteria.
What to Know About Backup Offers
Backup offers are essentially a plan B in the real estate world. When a property is under contract but not yet sold, a backup offer acts as an insurance policy for the seller. Here’s what to know:
- Positioning: While the primary offer holds precedence, a backup offer steps in if the initial deal doesn’t close. It essentially puts you next in line to buy the property.
- Advantage for Sellers: Backup offers provide sellers with a safety net, ensuring they have interested buyers even if the first deal falls through.
- Hope for Buyers: For buyers, submitting a backup offer means you’re still in the game. If you’ve found your dream home and it’s under contract, a backup offer can be your second chance at securing it.
- Conditions Apply: Just like the primary offer, backup offers can have contingencies. Buyers can specify conditions that must be met before the sale becomes binding.
Ready to Bypass the Waiting Game?
At the end of the day, navigating the complex world of real estate listings, offers, and contracts can be a stressful experience. And while backup offers provide hope, they also come with an agonizing waiting period, hoping for primary deals to fall through. If this sounds less than ideal, there’s another path to consider: partnering with a cash home buyer.
Selling your home to a cash buyer like us means a fast closing with no need to wait for bank approvals or extended inspections. It also provides a level of certainty that is hard to find elsewhere. So, if you are looking for a straightforward and fast home-selling experience, don’t hesitate to reach out to us for a free, no-obligation quote and take the uncertainty out of your home-selling experience.