What Does Contract Pending Mean in Real Estate?

A property listed as “contract pending” in real estate indicates that a seller has accepted an offer from a buyer. This status signifies that both parties have agreed to the terms of a sale, but the transaction has not yet been finalized.

Defining “Contract Pending”

When a property status changes to “contract pending,” it means a legally binding agreement is in place between a buyer and seller. The property is no longer actively marketed to other potential buyers, although it remains visible on real estate platforms.

This differs from an “active” listing, where a property is still available for offers and open for showings. It also differs from “contingent” status, which typically means an offer has been accepted but is subject to specific conditions being met, such as the buyer selling their current home or a satisfactory home inspection. While “contingent” often precedes “pending,” “pending” generally implies that most, if not all, major contingencies have either been satisfied or are actively being worked through.

Sellers may still entertain “backup offers” even when a property is pending. A backup offer becomes active only if the primary contract falls through.

The Activities During Pending Status

Once a contract is pending, several critical activities typically commence to move the transaction toward completion. A home inspection is usually one of the first steps, where a professional evaluates the property’s condition.

Following the inspection, buyers often have the opportunity to negotiate repairs with the seller or request credits based on the inspector’s findings. If significant issues arise, the buyer may also have the option to withdraw from the contract without penalty, depending on the terms of their agreement.

Another crucial activity is the home appraisal, which a lender mandates to determine the property’s fair market value. An independent appraiser assesses the property, considering its condition, location, and comparable sales in the area. This valuation ensures that the loan amount requested by the buyer does not exceed the property’s actual worth, protecting the lender’s investment.

Simultaneously, the buyer works to secure final financing approval from their chosen lender. This involves submitting extensive financial documentation, including income verification, employment history, and asset statements, to underwrite the loan. The lender reviews these documents to confirm the buyer’s eligibility and ability to repay the mortgage.

A title search is also conducted during the pending period to ensure the seller has clear legal ownership of the property and that no undisclosed liens, easements, or other encumbrances exist. The title company then issues a title insurance policy, safeguarding both the buyer and the lender against title defects. This search can take between 10 to 14 days to complete.

Possible Resolutions of a Pending Contract

A pending contract typically culminates in one of two primary outcomes: a successful closing or the termination of the agreement. A successful closing signifies the official transfer of property ownership from the seller to the buyer. During closing, all final documents are signed, funds are exchanged, and the buyer receives the keys to their new home.

This final step involves paying closing costs, which can range from 2% to 5% of the home’s purchase price for buyers. These costs cover various fees such as lender charges, title insurance, and recording fees. Once all conditions are met and paperwork is finalized, the transaction is officially recorded with the local government, making the sale public.

However, a pending contract can also fall through for several reasons, often related to unfulfilled contingencies. For instance, if the home inspection reveals significant issues that the buyer and seller cannot agree to resolve, the buyer may choose to terminate the contract. Similarly, if the appraisal value comes in lower than the agreed-upon sales price and the parties cannot renegotiate, the financing contingency may not be met, leading to contract dissolution. Financing falling through is another common reason, occurring if the buyer is unable to secure final loan approval due to changes in their financial situation or stricter underwriting requirements. When a contract terminates, the property usually returns to an “active” status on the market, allowing other potential buyers to make offers.