Welcome to our article on the difference between “pending” and “under contract” in the real estate world. If you’re currently navigating the home sale process or looking to buy a home, understanding these terms is crucial. Let’s dive in and explore the nuances of these home sale statuses.
Key Takeaways:
- When a house is “under contract,” the seller has accepted an offer, but there are still contingencies to clear before closing.
- “Pending” usually means all contingencies have been met, and the sale is on its way to closing.
- Contingencies like financing, appraisal, home inspection, and home sale protect the buyer in a real estate contract.
- “Active under contract” means the seller is still open to backup offers, while “sale pending” generally indicates all contingencies have been cleared.
- You can still make an offer on an under contract home, but the chances of the prior deal falling through are low.
Understanding Under Contract Status
A house that is “under contract” means the seller has accepted an offer, but there are still contingencies that need to be met before the deal can close. These contingencies protect the buyer during the home purchase process and ensure that certain conditions are satisfied before the sale is finalized.
One common contingency is the financing contingency, which allows the buyer to secure adequate financing for the purchase. This contingency is crucial because it ensures that the buyer has the necessary funds to complete the transaction.
Another important contingency is the appraisal contingency. Before finalizing the mortgage, the buyer may want to confirm the value of the property through an appraisal. This contingency protects the buyer from overpaying for the house.
Additionally, there is a home inspection contingency, which allows the buyer to uncover any major issues with the property. This contingency gives the buyer an opportunity to negotiate repairs or even back out of the deal if substantial problems are discovered.
Lastly, there is the home sale contingency. In some cases, buyers may need to sell their previous home before purchasing a new one. This contingency ensures that the buyer has enough time to complete the sale of their current home before moving forward with the purchase of the under-contract property.
In summary, understanding the under contract status is essential for buyers in the house purchase process. It signifies that the seller has accepted an offer, but there are still contingencies that need to be met. These contingencies, such as financing, appraisal, home inspection, and home sale contingencies, protect the buyer and ensure a smooth and secure transaction.
Table: Contingencies in Under Contract Status
| Contingency | Description |
|---|---|
| Financing Contingency | Ensures the buyer can secure adequate financing for the purchase |
| Appraisal Contingency | Confirms the value of the property before finalizing the mortgage |
| Home Inspection Contingency | Allows the buyer to uncover any major issues with the property |
| Home Sale Contingency | Gives the buyer time to sell their previous home before purchasing |
Active Under Contract and Backup Offers
When a property is listed as “active under contract,” it means that the seller has accepted an offer, but they are still open to receiving backup offers. This status is often used when the seller is uncertain about the current deal and wants to ensure they have a backup option in case the deal falls through. As a buyer, seeing a house listed as “active under contract” presents an opportunity to submit a backup offer and potentially secure the property if the initial deal does not proceed.
Submitting a backup offer on an active under contract home can be advantageous. While the current deal may move forward as planned, there are instances where contracts do fall through. By making a backup offer, you position yourself as the next in line to purchase the home if the primary deal fails. It’s essential to work closely with your real estate agent to understand the seller’s situation and gauge the likelihood of the existing contract not proceeding.
By providing a backup offer on an active under contract property, you showcase your interest and commitment to the seller. While there is no guarantee that your offer will be accepted if the primary deal falls through, it keeps you in the running and increases your chances of securing your desired home. Remember to consult with your agent and carefully consider the risks and benefits before deciding to make a backup offer.
| Pros of Submitting a Backup Offer | Cons of Submitting a Backup Offer |
|---|---|
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Sale Pending and Interchangeability of Terms
Sale pending and under contract are terms commonly used in home listings, but there can be confusion about their exact meanings. While they are often used interchangeably, it’s important to understand the subtle differences between the two. When a house is listed as under contract, it means the seller has accepted an offer, but there are still contingencies to clear before the deal can close. On the other hand, sale pending typically indicates that all contingencies have been met, and the sale is on its way to closing.
Contingencies are conditions added to a real estate contract to protect the buyer. These may include financing, appraisal, home inspection, and home sale contingencies. It’s worth noting that while under contract signifies that there are still contingencies to be met, pending status usually indicates that all contingencies have been cleared. However, due to the interchangeability of the terms, it’s always a good idea to have your buyer’s agent reach out to the seller for clarification on whether backup offers are being accepted.
To summarize, while under contract and sale pending are similar in that they both indicate a progressing home sale, they do have distinct differences. Understanding these differences can help buyers better navigate the real estate market and make informed decisions. By working closely with a buyer’s agent and gathering as much information as possible, you can assess your chances of securing a home that is listed as under contract or pending and explore any potential backup offer opportunities.
Making Offers on Under Contract Homes
If you find a home you love that is under contract, you can still make an offer. Have your real estate agent reach out to the seller’s agent to inquire about backup offers and your chances of being considered. It’s important to note that the likelihood of the seller’s prior deal falling through is low. However, by making an offer, you have a chance to be considered if something does go wrong with the current buyer’s contract. Work with your agent to determine the best course of action and strike a balance between protecting your interests and pursuing your dream home.
One key aspect of making offers on under contract homes is negotiation. If there are backup offers being accepted, you may have an opportunity to negotiate terms and potentially secure a better deal. Your real estate agent can guide you through the negotiation process and help you evaluate the seller’s willingness to consider other offers. By understanding the market and leveraging your agent’s expertise, you can make an informed and strategic offer.
While the chances of buying an under contract home are relatively low, it’s still worth exploring the possibility if you truly desire the property. Discuss your options with your real estate agent and weigh the risks and benefits. Remember, making an offer on an under contract home requires patience, as you may have to wait for the current deal to fall through. However, if you’re willing to take the chance, it could lead to securing your dream home.
Note: The image above depicts the process of making an offer on an under contract home.
Chances of Contracts Falling Through
Real estate contracts occasionally fall through due to various factors. Understanding the termination reasons can help buyers assess the likelihood of an existing deal being on shaky ground. Some common reasons for contract termination include:
- Home Inspection Issues: Problems uncovered during the home inspection can lead to contract cancellation.
- Financing Issues: If the buyer fails to secure adequate financing, the contract may become void.
- Appraisal Issues: If the appraised value of the property falls short of the agreed-upon price, the buyer may choose to terminate the contract.
These are just a few examples; other reasons could include contingency issues, title/deed problems, or even the buyer losing their job. While the likelihood of a contract falling through is relatively low (around 7% according to a January 2022 survey), specific circumstances can increase the chances. For instance, if the buyer has an unstable financial situation or there are significant issues uncovered during the home inspection, the contract’s stability may be compromised.
Assessing the likelihood of a contract falling through requires gathering information from the seller and considering the specific circumstances. Buyers should consult with their real estate agent to evaluate the risks and make an informed decision.
Termination Reasons for Real Estate Contracts
| Reason | Description |
|---|---|
| Home Inspection Issues | Problems uncovered during the home inspection, such as significant structural issues or the presence of hazardous materials, can lead to contract termination. |
| Financing Issues | If the buyer fails to secure adequate financing within the agreed-upon timeline or encounters unexpected difficulties in obtaining a mortgage, the contract may be terminated. |
| Appraisal Issues | If the property’s appraised value falls short of the agreed-upon purchase price, the buyer may choose to terminate the contract or renegotiate the terms. |
| Contingency Issues | Contingencies in the contract, such as the sale of the buyer’s current home or the satisfactory completion of repairs, may fail to be met, leading to contract cancellation. |
| Title/Deed Problems | Issues with the property’s title or deed, such as disputes or liens, can render the contract null and void. |
| Buyer Losing Job | If the buyer loses their job or experiences a significant change in their financial situation before closing, they may no longer be able to meet the financial obligations of the contract. |
| Other Miscellaneous Reasons | There can be other unforeseen circumstances that necessitate contract termination, such as personal emergencies or changes in the buyer’s life circumstances. |
Possibility of Buying Under Contract or Pending Homes
If a home you’re interested in is listed as under contract or pending, it’s not necessarily too late to buy it. While it’s less likely for a pending sale to fall through, under contract homes still have a possibility of the deal not proceeding. If the contract falls through, your backup offer may come into consideration. However, it’s essential to be aware that the seller’s prior deal is unlikely to fall through, and making backup offers can put you in a state of limbo while missing out on other homes. Carefully consider the risks and consult with your real estate agent to determine the best course of action.
Although under contract homes may have contingencies that need to be cleared, some buyers may back out due to financing issues, problems uncovered during a home inspection, or other unforeseen circumstances. This can create an opportunity for backup offers to be considered. However, it’s important to note that the likelihood of the seller’s prior deal falling through is low. Therefore, while it is possible to make an offer on an under contract home, it’s crucial to understand the risks involved and to have realistic expectations.
When considering buying an under contract or pending home, it’s essential to work closely with your real estate agent. They can help you navigate the home purchase process and provide insights on the likelihood of a contract falling through. Your agent can also assist in determining the best course of action, whether it’s making a backup offer, exploring other options, or waiting for the right opportunity. By having a knowledgeable agent on your side, you can make informed decisions and increase your chances of a successful home purchase.
| Pros | Cons |
|---|---|
| Opportunity to purchase a desirable home | Low likelihood of the prior deal falling through |
| Possible consideration of backup offers | Risk of missing out on other homes while waiting for a backup offer to be considered |
| Opportunity to negotiate with the seller if the prior deal falls through | Uncertainty and potential for disappointment if the backup offer is not accepted |
Conclusion
Understanding the difference between pending and under contract is essential for buyers in the real estate market. When a house is listed as under contract, it means that the seller has accepted an offer, but there are still contingencies to clear before the deal can close. On the other hand, pending status indicates that all contingencies have been met, and the sale is on its way to closing.
While it’s possible to make backup offers on under contract homes, it’s important to note that the likelihood of the seller’s prior deal falling through is low. However, by gathering information from the seller and assessing your chances, you can make an informed decision. Working closely with your real estate agent is crucial to navigate the home purchase process and strike a balance between protecting your interests and pursuing your dream home.
Remember, backup offers should be carefully considered, as they can put you in a state of limbo while potentially missing out on other homes. Consult with your real estate agent to determine the best course of action based on your specific circumstances. By being proactive and informed, you can increase your chances as a buyer in the competitive real estate market.
FAQ
What does it mean when a house is listed as “under contract”?
When a house is listed as “under contract,” it means the seller has accepted an offer, but there are still contingencies to clear before the deal can close.
What are contingencies in a real estate contract?
Contingencies are conditions added to a real estate contract to protect the buyer. Examples include financing contingency, appraisal contingency, home inspection contingency, and home sale contingency.
What is the difference between “under contract” and “pending”?
“Under contract” means there are still contingencies that need to be met, while “pending” usually means all contingencies have been cleared, and the sale is on its way to closing.
What does “active under contract” mean?
“Active under contract” means the seller has accepted an offer but is still open to backup offers. It could indicate uncertainty about the current deal or caution until closing.
Can I still make an offer on a house that is under contract?
Yes, you can still make an offer on a house that is under contract. Reach out to the seller’s agent to inquire about backup offers and your chances of being considered.
What are the chances of a real estate contract falling through?
According to a January 2022 survey, the likelihood of a contract falling through is around 7%. Common reasons include home inspection issues, financing issues, appraisal issues, contingency issues, and title/deed issues.
Is it possible to buy a house that is under contract or pending?
While it’s less likely for a pending sale to fall through, under contract homes still have a possibility of the deal not proceeding. If the contract falls through, your backup offer may come into consideration.
