What Is the Difference Between Pending and Under Contract?
Understand the crucial differences between "pending" and "under contract" real estate statuses to navigate property listings effectively.
Navigating the real estate market often involves encountering various terms that can seem interchangeable but carry distinct meanings. Among these, “under contract” and “pending” frequently appear on property listings, leading to common confusion for prospective buyers. While both statuses indicate a property has attracted interest and is no longer actively available, understanding their specific implications is crucial. Distinguishing between these terms can significantly impact a buyer’s strategy, informing decisions about whether to pursue a property or continue searching.
Understanding Under Contract Status
When a property is listed as “under contract,” it signifies that a seller has accepted an offer from a buyer, but the transaction is not yet finalized. This stage is characterized by the presence of specific conditions, known as contingencies, which must be met before the sale can proceed to closing. Contingencies act as protective clauses for the buyer, allowing them to withdraw from the agreement without penalty if certain conditions are not satisfied.
Common contingencies include a home inspection, which allows the buyer to assess the property’s physical condition and negotiate repairs or credits for significant issues. A financing contingency requires the buyer to secure a mortgage loan within a specified timeframe, often ranging from 20 to 60 days. An appraisal contingency ensures the property’s appraised value meets or exceeds the agreed-upon purchase price, protecting the buyer and the lender. A home sale contingency might also be in place, meaning the buyer’s ability to purchase the new home depends on the successful sale of their current residence. If any of these contingencies are not met or waived, the contract can be terminated, and the property may return to the market.
Understanding Pending Status
A property typically transitions to “pending” status after most, if not all, of the agreed-upon contingencies have been successfully met or waived by the buyer and seller. This stage indicates a much higher likelihood of the sale completing, as the primary obstacles to the transaction have largely been resolved. While not yet closed, the pending status suggests that the deal is progressing smoothly towards its final stages.
At this point, the transaction is usually awaiting final steps, such as title searches, legal reviews, and the formal transfer of funds. The property is generally considered off the market, and sellers are typically not seeking new offers. While it is less common for a pending sale to fall through compared to an under contract one, it can still happen due to unforeseen circumstances, such as issues with final loan approval, title problems, or buyer’s remorse.
Key Distinctions and Buyer Considerations
The primary distinction between “under contract” and “pending” lies in the stage of the real estate transaction and the resolution of contingencies. “Under contract” means an offer has been accepted, but the deal remains conditional upon various factors, such as a satisfactory home inspection or securing financing. This phase typically involves a contingency period, which can last anywhere from 10 to 60 days, during which these conditions are addressed.
Conversely, a “pending” status indicates that these contingencies have largely been cleared, moving the transaction closer to its conclusion. For a prospective buyer, encountering a property “under contract” might still present an opportunity to submit a backup offer. A backup offer positions a buyer to immediately step into the primary contract if the initial deal falls through due to unmet contingencies. This can be a viable strategy, as a significant portion of under-contract deals, around 14.3%, do not reach closing.
However, when a property is “pending,” the likelihood of the deal falling through is considerably lower, with only about 5% of pending sales failing to close. In this scenario, submitting a backup offer is generally less effective, as the transaction is much more secure. Buyers encountering a pending listing should consider the property as essentially off the market and focus their search on other available homes. Understanding these differences empowers buyers to navigate real estate listings more effectively.