There’s a fair amount of industry-specific terminology to keep track of in the world of Real Estate. If you are new to real estate and are trying to get your foot in the door (real estate pun intended), it is good practice to familiarize yourself with as much of this jargon as possible. One term you may have heard being tossed around is pending sale. In this article, we will break down what a pending sale is and how pending sales affect both homeowners and potential buyers.
A pending sale means a house has gone through every stage in the closing process, except for closure. For a house to be pending, several things have to occur, including:
If you’re confused after reading those bullet points, don’t worry. We will break down the meaning of each of those terms and some others to help better explain the closing process.
The process of selling a home involves many phases as well as moving parts. So let’s go step by step and look at some of the key phases of the buying/selling process that lead up to the pending status.
In a real estate sale, an escrow is a neutral third party that helps ensure that the transaction process remains fair and legal for both the buyer and the seller. All documents and payments are safely held and managed in an escrow account throughout the sale and only handed over to the buyer and seller when the process is complete. Typically, an escrow account is provided by an attorney, title company agent, or closing company. Setting up an escrow account at the very beginning of the selling process will ensure that everything runs smoothly from start to finish. Additionally, when reviewing your mortgage statement, you may also see escrow listed as a line item. Visit us for more information on escrow balances .
If you’re selling your house, you’ll likely receive many offers, some below your asking price. Once you’ve received an offer that you are satisfied with, you can agree to accept the offer. When an offer is accepted, you can begin filling out the paperwork required to close. However, both parties must meet certain contingencies for the sale to be made final.
Contingencies are requirements held by both parties in order for the sale to be made. Five contingencies are:
Each of these contingencies is an opportunity for the sale to fall through, which is why, although the bid has been accepted, the sale is by no means final. It should also be noted that a contingent sale is different from a short sale. A contingent sale means that the contingencies agreed upon have not yet been met, and the seller is still accepting offers. When a sale is pending, the contingencies have been met, and the sale is being processed
While browsing through online realty sites, you may have seen specific kinds of pending titles attached to different homes. These specific types of pending sale statuses include:
This means that the house is going through the short sale process with the mortgage holder and is far along in the process. A short sale has nothing to do with the length of the sale but rather refers to a home being sold for less than the amount owed on the mortgage due to the owner's financial situation.
This status is often automated by the online listing service on which the house is listed. This status is pretty straightforward, as it simply means that the house has been listed for more than four months. However, this may indicate that complications have arisen during the closing process, which can be advantageous for those still interested in making an offer. Before getting their hopes up too high, hopeful buyers should note that this status may be inaccurate and result from the realtor forgetting to update it after a close.
If there appears to be a problem with the current deal, sellers can accept backup offers. However, this is only in preparation if the original deal is not fulfilled due to a contingency. A seller cannot abandon the initial buyer and accept one of the back-ups offers just because it is a better deal.
When a house enters the pending phase of its sale, it may seem like the process is nearing your end. While in most cases, this may be true, the closing process is far from over. Let’s discuss several important things to be aware of while the house you are selling enters the pending stage. Afterward, we’ll take a look at how the pending status can give potential buyers a chance to end up with their dream home, even after another offer has been accepted.
Once your sale has entered the pending phase, it is extremely challenging and potentially illegal to back away from the sale. Once you’ve signed documents and accepted your buyer’s earnest money, you are saying that you agree to sell your house. Earnest money is a type of security deposit that buyers pay to show that they are serious about purchasing. If you decide to back out, you can be sued by your buyer and even forced to sell the home according to the agreed-upon terms. On the other hand, buyers are still able to back out of the deal even after the contract has been signed. As discussed above, most contracts include contingencies which means that the home must meet certain criteria for the sale to be valid. If any of the contingencies aren’t met, the buyer can still legally back out.
With every home sale comes a house inspection. Inspectors determine whether or not there are any serious issues with the house, including:
Each of these could potentially break contingencies and affect the sale of your home. While you may be tempted to see the results of your home's inspection, the seller of the home is typically not granted access to the report. Since the buyer is the one who is responsible for paying for the report, it belongs to them. They are only required to show you parts of the report that detail any issues they are demanding credit or repairs. While this may seem frustrating to sellers, not seeing the entire report can actually be beneficial. For instance, if you demanded to look at the entire report and the sale falls through, you may be obligated to inform future buyers of any issues you were made aware of in the inspection. Additionally, demanding a report from your buyer can weaken your relationship, making them feel nervous and antagonized. Anything that can lower the odds of you completing the sale should be avoided. In the case of viewing your home inspection, ignorance is bliss.
These processes take a long time. Additionally, between inspectors, attorneys and buyers, there are many parties involved. If you are waiting a long time to hear back from someone, don’t lose hope. In the case of selling a home, no news is good news. While you are waiting to hear back from the title company, take that time to prepare your house for the final walkthrough. Pacing yourself when preparing your home for sale will be key to creating a seamless and successful close.
Perhaps you’ve found your dream home but are crushed to find out that the sale is pending. If this is the case, hope is not lost. As stated above, a pending sale is not a closed sale, and there are many situations where it is still worth pursuing a home with a pending status. Here are some things you can do as an interested buyer to help you land a pending sale.
The best thing you can do as an interested party is let the seller know that you are interested in buying the home. Real estate agents often continue to sell homes up to the last minute in order to ensure the best deal. Furthermore, offering the seller certain benefits like covering the cost of closing fees or being flexible with your moving dates can help sway the seller in your direction.
It’s also important to know that even though a house may be pending, there are still several factors that may make the sale fall through. A home may reenter the market if it fails to pass all aspects of inspection that fulfill contingencies. If you are willing and prepared to renovate the home, certain red flags that pop up in the inspection may not be of concern for you. Another reason a house may reenter the market is if the buyer cannot secure funding for the home. Even if the initial buyer is pre-approved for a loan, they may not receive the loan if their financial situation significantly changes. For example, this can happen if the initial buyer loses their job or acquires debt. According to Gary Malin, the president of Citi Habitats in New York City, “Until the ink dries on the contract, no transaction is legally binding.”
If the sale does fall through, having as much information on the property as possible can help your odds. For instance, it is helpful to consistently check whether or not the home is still pending. This way, the minute the agreed-upon closing date comes without the sale being made, you can immediately swoop in before anyone else has the chance to make an offer. Furthermore, doing your research on the neighborhood, property taxes, and the home’s value will make you ready for quick action when the moment arises.
Whether you are on the buying side or the selling side of a real estate transaction, it’s important to be as familiar as you can be with all the various terms and steps involved. When it comes to Real Estate, communication is everything. If you are still uncertain about the logistics of a particular pending sale, don’t be afraid to reach out to a realty professional for guidance. While the process of selling a home can be confusing and tedious, the payoff can be extremely rewarding for everyone involved. Sources: Investopedia | 12 Steps Of A Real Estate Closing Fortune Builders | The Home Buyer's Guide To Real Estate Contingencies Realtor.com | What Does Sale Pending Mean? Don’t Give Up on Your Dream Home