What Does Pending Mean in Real Estate? What You Need to Know9 Aug Melody Keilig
In real estate, pending means that a buyer has submitted an offer and the seller has accepted it. At this point, you cannot outbid the other buyers because it's already past the time of bidding.
But that doesn't mean the home is officially sold, so you can still express interest in the house if the current deal between the seller and buyer becomes rescinded.
So, what can you do if your ideal home is in the pending status? Check out these tips to navigate this obstacle like a pro!
Can You Make An Offer on a House That’s Pending?
There's a big difference between a pending sale and a home that has been sold. Pending means that the seller accepted an offer on the home, but official ownership has not been transferred to the buyer. Further, no money has been transferred to the seller, so a completed real estate transaction hasn't taken place yet.
During this time in the process, the seller and buyer have agreed on the home price, conditions, possession date, and completed the contract. In this conditional period, the buyer submits their offer to their bank or lending institute to receive final approval for their loan. In most cases, the buyer will then need to get a home appraisal and schedule an inspection.
When a home is pending sale, it can be challenging to make an offer. Most real estate purchase contracts have specific terms that prevent the seller from canceling the agreement with the buyer if they receive a higher offer for the home.
If you are looking at a home that is pending sale, it's ideal to express your interest in it to the listing agent. Make it known that you are willing to submit a full-price offer if the pending sale falls through.
Although the highest-priced offer won't always get you the house, if you want to have your best foot forward in case a backup offer is needed, there are tips and tricks to creating an attractive offer.
* Offer to Pay in Cash: For example, even if your offer isn't high-priced, offering to pay for the home in cash is a great option to get the seller's attention. According to a 2014 study by RealtyTrac, 43% of homes were bought in cash during the first quarter of that year.
* Make Sure You’re Pre Approved: If you’d like to ensure you’re ready to take action if the home sale falls through, a preapproval letter from your mortgage broker or bank is the way to go. This letter will confirm that you're prepared and ready to buy at a set price and have been preapproved for the loan.
* Offer a Quicker Closing Period: If you can offer a faster closing period, this can help you when higher bids go against you. Most sellers want to close on a home within 30 days, so if you can have all of your requirements ready to go, a lower offer can sometimes win over a seller.
If you are feeling defeated by a pending home sale on the property you want to purchase, remember that not all of these sales go through.
According to data from Forbes, the list for America's Top 10 Metros Where Starter Home Sales Failed in 2016 includes three metro areas in Texas.
Fort Worth faced a failure of starter home sales of 15.3% in 2016. Meanwhile, Dallas followed closely behind with a failed home sales rate of 15%. Houston came in last out of these three metros with their 12.8% failure home sales percentage.
In the top 100 United States metro areas, the average failure home sales rate in 2016 was at 6.3%, roughly half the rates these three Texas metros saw. That means if you’re in Texas, you may have a better chance of snagging a pending home, although it’s still unlikely.
The Various Types of Pending Statuses
When it comes to pending statuses, you may see different types during this process. It’s handy to know the definitions of each status in order to know if these opportunities are worth pursuing. Check out the definitions of the different types of these statuses.
* Taking Backups: Backup offers are still accepted by the seller, just in case the first one falls through.
* Release/Continuing to Show: The contingencies were met, but a kick-out clause is in effect and the buyer can still show and accept offers.
* Do Not Show: This means the seller will no longer show their house or accept any more bids.
* Over Four Months: Any pending listing has been active for four months or more and has a tentative closing date.
Overall, the main takeaway is to look for the phrases "release, taking backups, or continuing to show" to ensure that you might still have a chance at purchasing the home you're looking at.
Can A Pending Sale Fall Through?
Pending home contracts can fall through for several reasons, even near the end of the home selling process. This could happen due to the seller losing their source of income, such as their job, causing them to no longer qualify for financing.
Other reasons for the contract falling through include the buyer backing out of the deal themselves, sometimes at the last minute. As a result, the home would be put back on the market, where other potential buyers can make their proposals.
Here are some other reasons a home sale can fall through.
* Financing Falls Through: Financing is a crucial part of buying a home. However, even if a buyer is preapproved for a loan, losing their income by becoming laid off or quitting their job can cause the lender to change their mind.
* Buyer's Remorse: Sometimes, buyers have second thoughts about a home they've wanted to purchase. This remorse could be from the stress of taking on a large purchase, finding another home, or the home's condition itself can cause buyers to change their minds.
* Low Appraisal: When bidding wars raise the price of a home above market level prices, this causes low appraisal. Often, lenders will not approve the loan if the appraisal is much lower than expected.
* Home Inspections: All homes will have an issue at some point, but when there's a significant problem uncovered with the home inspection, this can cause the buyer to change their mind and back out. Whether it's due to the financial cost of fixing the problem or the buyer not wanting to take on that responsibility, they can legally back out after the inspection if the buyer has remorse.
* Short-Sale Failure: When the seller agrees to sell their home to prevent foreclosure, this is called a short sale. The bank will then arrange to accept less money than the homeowner owes, but only if they sell the home. When the property is sold, the former homeowner transfers the sale price to the lender. In this transaction, the lender will clear the seller's debt.
The lender must approve the home's final selling price, but it will become "pending" as soon as the seller accepts the offer. If the lender vetoes the sale and the seller has to put it back on the market, you can come in and buy the home.
How Long Do Homes Stay “Pending”?
When a home is pending, how much time do you have before the sale goes through? The typical timeline of a pending sale can be 20 to 30 days or up to 60 days, depending on the closing date. This process includes the time it takes for the seller or buyer to meet requirements for sale, which could include securing a loan, getting a title check, home inspection, possible repairs, or the buyer selling their home.
What's the difference between the ranges of days?
The home may face a pending status range of 30 days if the market is super-hot with homes sold quickly. It all depends on the agreement between the seller and listing agent, but the agent will want to sell the house within the least amount of days possible to get it off the market.
If the pending status takes up to 60 days, this is typically due to delays.
Pending vs. Contingent: What’s the Difference?
The main difference between a pending or contingent status is that a pending status means that a house is no longer active. On the other hand, a contingent status means that the house is active and allows the seller to receive additional offers from potential buyers.
Further, if a home is in pending status, this also means that all contingencies were met. The house then becomes closer to being sold, but the deal could fall through due to inspection or finances, but it's less likely to happen during pending than the contingency status.
Common Contingent Statuses
A contingent status is when the home seller has accepted an offer, but the home's closing requires specific terms. Just like with pending types, there are several types of contingencies.
* Continue To Show (CCS): When a listing is marked as Continue to Show (CCS), it means there are multiple contingencies that must be fulfilled. In this situation, the seller and their agent have decided to show the home and accept offers from potential buyers.
* No Show: When a listing is a No Show, this means the seller has decided to no longer show the home or accept more offers. Even though there are contingencies, the seller typically believes they will be met.
* With Or Without A Kick-Out Clause: A Kick-Out Clause refers to a deadline for the buyer to meet all contingencies. However, if there is no set deadline, there is no Kick-Out Clause.
* Short Sale Contingent: When the seller has determined that they will accept less money than the amount owed on the mortgage, it’s called a Short Sale. This contingent status, which can take months to complete, indicates that the home has an accepted offer and is no longer for sale, but the Short Sale is still in progress.
* Contingent Probate: In the situation where the death of the homeowner happens, this causes the Probate status to occur.
Similar Real Estate Terms to Know
The listing statuses in real estate are controlled in the Multiple Listing Services (MLS) by the listing agent. Below are the different types of MLS statuses, where the information received is sent to other real estate websites. However, some websites use slightly different real estate terminology, so check with the listing agent for specific definitions.
These listings are active on the market and available for sale with some offers but no contract. This means you can propose since no offers have been accepted yet.
Under Contract-Show Listings
Under contract listings are broken down into "show" and "no show," of which both are "under contract" with the buyer. Show listings can be shown for other buyers to make a backup offer and some MLS systems may call this status "Backups Requested."
Under Contract-No Show Listings
When the seller no longer wants to sell the home, it's a pending sale referred to as a No Show listing. A few reasons the seller would choose to no longer sell include terms of the existing contract, or they don't want to prepare the home for showings.
Online Under Contract Listing Statuses
When the status is changed in MLS, the data is sent to real estate and independent brokerage websites. As mentioned earlier, separate websites may use different terms.
Once the buyer and seller sign the contract, the buyer's due diligence period begins. The buyer needs this time to get home inspections done, solicit financing, and other crucial steps that are necessary before closing.
According to the National Association of Realtors, a strong rebound occurred, with pending status rising to 8% in May 2021. But if you're a new home buyer or you have your heart set on a particular home, don't lose all hope if it has a pending status. After all, some buyers fall through, and the house is back on the market.
So if you see a pending status, don't hesitate to contact the listing agent and express your interest in the home. You never know what could happen with the deal falling through, whether it be any of the reasons stated above, like buyer's remorse or preventing foreclosure.
Please don't give up on your ideal home, but it can also be a good idea to keep your options open. Of course, pending status isn't likely to fail, so you must always prepare for the best and the worst in the world of home hunting. As always, if you’re in the market for a Texas home, reach out to us here at BHGRE HomeCity!