Remember the big red “Pending” sticker you used to see across “For Sale” yard signs? Before the Internet and online listings, that sign was the consumer’s only indication that a home had a deal.
Today’s consumers discover the words “contingent” or “pending” online, and they don’t always know what it means.
Many buyers assume that “sale pending” means the property is no longer available. But that’s not always the case.
If you’ve fallen in love with a home that shows as pending, don’t immediately rule it out. Here’s what you need to know to decide if a “sale pending” home is still worth pursuing.
Understanding ‘subject to’ and ‘contingent upon’
To understand what “sale pending” means, it helps to understand how a typical real estate transactions work.
A buyer generally makes an offer “subject to” a property inspection, a bank appraisal or full loan approval. Sometimes they make it “contingent upon” the sale of their current home.
If they can’t get financing, sell their current home, or resolve an issue from the inspection with the seller, the buyer can exit the contract, subject to one of those terms.
A property with a deal on it may still be for sale
In some places, real estate agents label a home with some contingency as “active with conditions” or “active continue to show, letting other buyers and agents know that the seller will still entertain other offers.
During this period, the seller is unable to enter into an agreement with another buyer, but the sale is not a “done deal.”
What this means to another buyer is that there’s an opportunity for a “backup” offer. If the first offer falls through, the seller can move straight to the backup. Otherwise, they will have to go back on the market – and, in some ways, start from scratch.
It’s the exception to the rule, but in some markets, buyers don’t sign a contract until after they’ve inspected and investigated. That means they only have a “verbal” agreement with the seller. It’s not a done deal until signed by all parties, and the home is still available until both sides sign a contract. A backup offer will try to trump the first place offer during the days and weeks when the first buyer inspects, appraises and investigates.
No more contingencies = ‘sale pending’
A deal that’s truly pending is one in which the buyers have removed all contingencies. The buyer is “locked in” to buying the home.
The final step is to move toward closing, which can take anywhere from a few days to a few weeks.
Most agents won’t label a home “pending” until this time, when the sale is close to a done deal. In this case, the sale is pending the final closing.
Can a buyer walk away after removing all contingencies? Absolutely, but it’s less likely. From time to time, a buyer has an emergency and needs to exit the contract. But most likely, the buyer risks losing the earnest money deposit.
Find out the property’s status
Has the buyer had the inspections? Did they go well? Were there any issues? Have your agent ask the listing agent these questions to understand the current deal on the table.
Doing so will help you understand whether there’s a potential opportunity here. It will also give the seller some leverage.
Don’t get your hopes up when the home of your dreams shows “sale pending.” Instead, put the home on the back burner and follow the sale. In changing markets, buyers get cold feet, or banks’ lending standards get more rigid, causing deals to fall apart.
A smart agent will make his or her customer’s interest known, so that if a deal falls apart, the buyer is right there, ready to step in.
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Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.
Source: Zillow Feed