What Does Under Contract Pending Mean?

Real estate transactions involve several stages, each indicating the current status of a property as it moves from being listed for sale to being officially sold. Understanding these statuses is important for both buyers and sellers navigating the housing market. Terms like “under contract” and “pending” frequently appear, signaling that a property is no longer available for new offers in the traditional sense, but has not yet reached its final sale. These statuses reflect different points in the process where a mutual agreement has been established between a buyer and seller.

Defining “Under Contract” and “Pending”

When a property is listed as “under contract,” it signifies that a seller has accepted an offer from a buyer, and a legally binding purchase agreement has been signed by both parties. This stage means the transaction is proceeding, contingent upon certain conditions being met. These conditions, known as contingencies, protect both parties, allowing them to withdraw without penalty if specified events do not occur. A common contingency allows the buyer to conduct a home inspection and potentially renegotiate or exit the deal based on findings.

The “pending” status indicates a more advanced stage in the real estate transaction. At this point, most or all contingencies outlined in the purchase agreement have been satisfied or waived. While “under contract” and “pending” are sometimes used interchangeably, “pending” implies that the sale is very close to completion, with fewer obstacles remaining before closing. Definitions and distinctions between these statuses can vary depending on local Multiple Listing Service (MLS) rules. Both statuses confirm a valid and active agreement between the buyer and seller.

What Happens During These Phases

Once a property is “under contract,” procedural steps begin, designed to ensure both parties fulfill their obligations before the sale can be finalized. A primary action is the home inspection, where the buyer hires a professional inspector to evaluate the property’s condition. This inspection period, lasting 7 to 14 days, allows the buyer to identify significant issues and potentially request repairs or credits from the seller. If major problems are discovered, the buyer may terminate the contract.

Following inspection, or concurrently, the appraisal process takes place, particularly if the buyer is obtaining a mortgage. A lender requires an independent appraisal to determine the property’s market value, ensuring it supports the loan amount. If the appraisal comes in lower than the agreed-upon purchase price, the financing contingency may allow the buyer to renegotiate the price, pay the difference out of pocket, or potentially withdraw from the agreement. This step helps both the buyer and the lender mitigate financial risk.

Securing financing is another contingency during these phases, allowing the buyer 15 to 30 days to obtain loan approval. Buyers provide a pre-approval letter with their initial offer, but final loan approval depends on factors including the appraisal and the buyer’s financial standing. A title search is conducted to verify clear ownership of the property and identify any liens, easements, or other encumbrances that could affect the transfer of title. Title insurance is then purchased to protect both the buyer and the lender against future claims concerning the property’s ownership history.

As these contingencies are met, they are removed from the contract, moving the transaction closer to the “pending” status and ultimately to closing. The buyer’s earnest money deposit (often 1% to 3% of the purchase price) is held in escrow and applied towards the down payment or closing costs. If the deal falls through due to an unfulfilled contingency, the earnest money is returned to the buyer, depending on the terms of the contract.

Implications for Interested Buyers

For prospective buyers, a property listed as “under contract” or “pending” presents unique circumstances. While the property is off the market to new offers, deals can fall through during these phases. Common reasons include issues from the home inspection, a low appraisal, or the buyer’s inability to secure financing. These occurrences create an opportunity for other interested parties.

An interested buyer can submit a “backup offer” on a property in these statuses. A backup offer is a formal offer submitted to the seller, stipulating that if the primary contract terminates, the backup offer automatically becomes the new primary contract. This strategy positions a buyer to quickly step in if the initial deal collapses, without re-engaging in a competitive bidding process. Sellers are not obligated to accept backup offers, and they only consider them if the initial contract is at risk.

While the likelihood of a pending sale falling through decreases closer to closing, it is not static until final closing documents are signed and funds are disbursed. Buyers interested in such properties should consult their real estate agent to understand the circumstances and potential for a backup offer. Staying informed about properties in these statuses provides a strategic advantage, allowing a buyer to be prepared if a new opportunity arises.