Your long search is over, and you've found the perfect house or land to call home. But that's not the whole story because it's discouraging to find out that a house you've been eyeing is under contract or pending.
But there is a misconception that "under contract" or "pending sale" means the home is off the market, which might not be the case. An informed buyer can make a plan to bid on a house that is either pending or under contract.
Aside from being pending vs. under contract, you may discover contingencies on the sale that may allow you to buy the property down the road. Discover the differences between under contract and pending, what contingent means, and what this means for a home for sale.
What Does It Mean to Be Under Contract?
A home "under contract" or "active under contract" means that a seller has accepted an offer from a buyer. As part of the sale contract, the buyer and seller have agreed upon the terms, such as the offer price, closing costs, earnest money deposits, and possible contingencies.
"Under contract" refers to an early stage of the home-buying process, meaning the deal might not close. A new buyer can submit a backup offer to take over the property if the current buyer falls through.
An earnest money deposit is often placed in an escrow account to protect the seller if the buyer walks away from the purchase. The buyer can, however, recoup their earnest money deposit for several reasons if the contract fails. The reasons range from ownership inconsistency to discovering potential home inspection problems.
What Does Pending Mean?
Properties marked as pending or sale pending indicate that the buyer and seller are very close to finalizing the deal. A pending sale means a sale has met all contingencies and all terms of the real estate contracts.
Land surveys, home appraisals, inspections, and title searches are all part of the due diligence between the parties during this period. If you are purchasing land, use a land purchase agreement template to capture all necessary details.
While pending home sales may still fall through, agents will be less likely to accept an offer on a pending property than they would on a property under contract. At this stage, the seller and buyer can sign a bill of sale to protect themselves in a dispute.
Differences between pending sale and under contract
To better understand the differences between these two statuses, here is a table summarizing the main points:
| Under contract | Pending |
|---|---|
| During this stage, a contract has just been formed between the seller and the buyer | Having met the contingencies, this is the last stage in the process |
| Interested buyers can still schedule showings and submit backup offers to the agent | The selling agent no longer accepts backup offers, and the property is no longer available for viewing |
| When under contract, the sale can begin with an agreed-upon offer | The advantage is knowing that the deal is almost done and is probably just awaiting financing or a clear title |
Why Are Contingencies Important?
Contingencies in real estate refer to conditions that must be met for a transaction to proceed. A contingency clause in a purchase agreement specifies a requirement or action that must be met for the contract to be legally enforceable. Before it becomes a binding contract, both parties must agree to each contingency and sign it.
Your contract can include the following contingencies as the buyer:
- Inspection contingency: A home inspection contingency allows you to negotiate the sales price, request repairs, or walk away from the deal if the inspection is negative. A pro forma might be helpful here for accurate estimates and expense projections.
- Mortgage contingency: Mortgage contingencies are available if you do not qualify for a home loan. Even if your mortgage application is pre-approved, you need a mortgage contingency unless you're buying cash.
- Appraisal contingency: A home's appraisal may be below the offer amount, which could lead to a bank rejecting your financing or requiring a higher down payment. If the appraisal is low, you can back out of the deal.
-
Home sale contingency: Your offer is subject to the successful sale of your current house under a home sale contingency. Most contingencies expire after a certain period, usually 30 to 60 days.
Note: Contracts may also be written with a right to void, allowing the buyer to cancel the deal without being penalized for any repairs suggested in the home inspection report.
Can A Seller Accept Another Offer While Under Contract?
The short answer is yes, you can still make an offer even if the home you want is under contract. When a current sale falls through, many agents will accept backup offers.
Properties with a "show" and "no show" status can be listed as under contract. When a real estate agent lists an under-contract property as a "show," other potential buyers may make backup offers. "No show" properties are not accessible to buyers, but offers can still be made.
You may get a better deal by making an offer on a home under contract rather than simply waiting to see if the original deal falls through. A good backup offer may make agents less likely to negotiate with current buyers, and you may have a better chance of getting the agent to accept your backup offer if the current contract is terminated.
Do Pending Sales or Deals Under Contract Fall Through?
In Trulia's estimation, 3.9% of any real estate transaction fails for any reason, including a bad home inspection. 96.1% of contracts make it to the end, which is a pretty good percentage.
Contingencies are built into real estate contracts so the buyer can withdraw from the deal without penalty if specific circumstances arise. In contrast, once the seller signs a contract, they are locked in.
The seller risks losing out on other offers if a deal with a buyer falls through, and they must close the deal with the buyer once a contract has been signed - despite receiving a more valuable offer later.
In addition to losing the home they want to buy, the seller could lose their current property if they fail to close on the current sale. A buyer can get their earnest money deposit back if they back out under a valid contingency. But a seller can keep the earnest money if the buyer breaches the contract without a valid reason.
When the buyer signs the contract, they pay 1% to 2% of the home's price as earnest money. In the event of a successful transaction, the funds are placed in an escrow account and used to cover the buyer's closing costs.
Helpful Resources:
Your long search is over, and you've found the perfect house or land to call home. But that's not the whole story because it's discouraging to find out that a house you've been eyeing is under contract or pending.
But there is a misconception that "under contract" or "pending sale" means the home is off the market, which might not be the case. An informed buyer can make a plan to bid on a house that is either pending or under contract.
Aside from being pending vs. under contract, you may discover contingencies on the sale that may allow you to buy the property down the road. Discover the differences between under contract and pending, what contingent means, and what this means for a home for sale.
What Does It Mean to Be Under Contract?
A home "under contract" or "active under contract" means that a seller has accepted an offer from a buyer. As part of the sale contract, the buyer and seller have agreed upon the terms, such as the offer price, closing costs, earnest money deposits, and possible contingencies.
"Under contract" refers to an early stage of the home-buying process, meaning the deal might not close. A new buyer can submit a backup offer to take over the property if the current buyer falls through.
An earnest money deposit is often placed in an escrow account to protect the seller if the buyer walks away from the purchase. The buyer can, however, recoup their earnest money deposit for several reasons if the contract fails. The reasons range from ownership inconsistency to discovering potential home inspection problems.
What Does Pending Mean?
Properties marked as pending or sale pending indicate that the buyer and seller are very close to finalizing the deal. A pending sale means a sale has met all contingencies and all terms of the real estate contracts.
Land surveys, home appraisals, inspections, and title searches are all part of the due diligence between the parties during this period. If you are purchasing land, use a land purchase agreement template to capture all necessary details.
While pending home sales may still fall through, agents will be less likely to accept an offer on a pending property than they would on a property under contract. At this stage, the seller and buyer can sign a bill of sale to protect themselves in a dispute.
Differences between pending sale and under contract
To better understand the differences between these two statuses, here is a table summarizing the main points:
| Under contract | Pending |
|---|---|
| During this stage, a contract has just been formed between the seller and the buyer | Having met the contingencies, this is the last stage in the process |
| Interested buyers can still schedule showings and submit backup offers to the agent | The selling agent no longer accepts backup offers, and the property is no longer available for viewing |
| When under contract, the sale can begin with an agreed-upon offer | The advantage is knowing that the deal is almost done and is probably just awaiting financing or a clear title |
Why Are Contingencies Important?
Contingencies in real estate refer to conditions that must be met for a transaction to proceed. A contingency clause in a purchase agreement specifies a requirement or action that must be met for the contract to be legally enforceable. Before it becomes a binding contract, both parties must agree to each contingency and sign it.
Your contract can include the following contingencies as the buyer:
- Inspection contingency: A home inspection contingency allows you to negotiate the sales price, request repairs, or walk away from the deal if the inspection is negative. A pro forma might be helpful here for accurate estimates and expense projections.
- Mortgage contingency: Mortgage contingencies are available if you do not qualify for a home loan. Even if your mortgage application is pre-approved, you need a mortgage contingency unless you're buying cash.
- Appraisal contingency: A home's appraisal may be below the offer amount, which could lead to a bank rejecting your financing or requiring a higher down payment. If the appraisal is low, you can back out of the deal.
-
Home sale contingency: Your offer is subject to the successful sale of your current house under a home sale contingency. Most contingencies expire after a certain period, usually 30 to 60 days.
Note: Contracts may also be written with a right to void, allowing the buyer to cancel the deal without being penalized for any repairs suggested in the home inspection report.
Can A Seller Accept Another Offer While Under Contract?
The short answer is yes, you can still make an offer even if the home you want is under contract. When a current sale falls through, many agents will accept backup offers.
Properties with a "show" and "no show" status can be listed as under contract. When a real estate agent lists an under-contract property as a "show," other potential buyers may make backup offers. "No show" properties are not accessible to buyers, but offers can still be made.
You may get a better deal by making an offer on a home under contract rather than simply waiting to see if the original deal falls through. A good backup offer may make agents less likely to negotiate with current buyers, and you may have a better chance of getting the agent to accept your backup offer if the current contract is terminated.
Do Pending Sales or Deals Under Contract Fall Through?
In Trulia's estimation, 3.9% of any real estate transaction fails for any reason, including a bad home inspection. 96.1% of contracts make it to the end, which is a pretty good percentage.
Contingencies are built into real estate contracts so the buyer can withdraw from the deal without penalty if specific circumstances arise. In contrast, once the seller signs a contract, they are locked in.
The seller risks losing out on other offers if a deal with a buyer falls through, and they must close the deal with the buyer once a contract has been signed - despite receiving a more valuable offer later.
In addition to losing the home they want to buy, the seller could lose their current property if they fail to close on the current sale. A buyer can get their earnest money deposit back if they back out under a valid contingency. But a seller can keep the earnest money if the buyer breaches the contract without a valid reason.
When the buyer signs the contract, they pay 1% to 2% of the home's price as earnest money. In the event of a successful transaction, the funds are placed in an escrow account and used to cover the buyer's closing costs.
Helpful Resources:
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