Imagine your excitement as you’re house hunting in your favorite neighborhoods or scrolling through real estate websites for the perfect house in the great neighborhood that’s close to your work and your kids’ school.
Now, imagine your surprise – and rising concern – as you walk past front yards with “Sale Pending” signs or see “Sale Pending” or “Under Contract” stamped in red letters on the online listings you had your heart set on.
If you’ve got a competitive streak, you might be wondering if you can still make an offer on that house.
When a house is under contract, the seller and buyer are broadcasting to the home buying world that they’ve reached an agreement and are ready to close on the deal. Sale pending means the seller has accepted an offer that meets all their requirements and is confident it will go to closing.
Let us offer some hope – sometimes a pending home sale falls through. If that happens, you might find an opportunity to swoop in and buy that dream home.
We’ll explain what aspiring buyers can do when they come face to face with a pending status on a house and explain what “contract contingencies” and “under contract” mean. You’ll be fluent in mortgage-speak in no time! We’ll also show you the steps you’ll need to take to make a move and take a house from “pending” to “home sweet home.”
What Does It Mean When a Home Is Pending or Under Contract?
A pending status on a house means the seller has accepted an offer that meets all their requirements and is confident it will go to closing. A pending status on a home isn’t the only way a potential buyer and seller can signal that they’re moving from an initial offer to close. They can also do this by listing the house as under contract or contingent contract/sale.
When a house is under contract, an offer has been accepted, but the sale depends on all contingencies being met.
When a house is listed as “pending,” there usually aren’t any contingencies attached. If there are contingencies, at this point, they’ve all been met, and the house is moving further to closing.
Contingent sales are common in real estate. They are so common that there are several contingencies a buyer or seller can add to a purchase agreement.
Home sale contingencies help protect buyers and sellers, but some can cause delays of days or weeks, depending on what the contingencies are.
What Roles Do the Buyer and Seller Play in a Pending Sale?
After an offer is accepted, the home’s status is listed as “pending.” The buyer and seller must complete different parts of the process before the house can close.
The buyer’s role
Once the buyer pays their earnest money and it’s deposited into an escrow account, they set up a home inspection and schedule an appraisal through the lender. Once the results are in, the buyer renegotiates with the seller if repairs are needed or the home sale price needs to be adjusted.
The buyer also makes sure they provide the right documents to their lender to ensure they can get the financing they need to buy the home.
The seller’s role
The seller makes sure the home inspector and appraiser have access to the home. Once the inspection and appraisal reports come back, the seller negotiates the final terms with the buyer’s agent and makes any final repairs on the home.
How Can a Pending Offer Fall Through?
Now that you know the more common home sale contingencies, you can see how they might fail.
Pending sales often fall through because contingencies weren’t met. The home inspection could find deal-killing problems, or the appraisal could come in under value. Financing for the loan could be denied or delayed for any number of reasons.
Home inspection contingency
The home inspection is a crucial part of the home buying process. The inspection is often when a pending or under-contract sale might hit a wall – especially if the buyer and seller don’t agree on who should pay for any issues uncovered during the inspection.
Let’s say a buyer puts in an offer on a beautiful home, but the home inspection shows serious roof damage. If the seller refuses to pay for the repair or lower the sale price so the buyer can make the repair, the buyer could back out of the deal – making the house available again.
Keep this in mind: If you decide to swoop in and make an offer, you’ll either need to negotiate the cost of the repair with the seller or be willing to cover the cost of repairing the roof yourself.
An appraisal is done by a professional appraiser to assess the value of a home. Lenders use appraisals to make sure the buyer isn’t borrowing more than the appraised value of the home. If they are, the lender may deny the mortgage loan.
The majority of home sales are financed with a mortgage. If the home’s appraised value falls under the selling price – especially in a seller’s market – the buyer’s mortgage loan application may not be approved.
When this happens, the offer often falls through. At this point, the seller can consider offers from other buyers – like, for instance – you.
And getting an appraisal that’s below the loan amount isn’t the only way a buyer can lose their loan.
When a buyer includes a financing contingency, it means they can back out of the deal if they can’t get a loan in the amount of their purchase offer. That also means that the seller can put the house back on the market.
This can happen because there’s reduced income from job loss, a personal emergency drained their savings or increased their debt or financial discrepancies disqualified them for the loan.
Again, no loan for the previous buyer = a shot at snagging your dream home.
Home sale contingency
Sometimes a buyer needs to sell their current home before they can buy a new home. In that case, they may add a contingency that lets them walk away from a deal if they can’t sell their home within a certain time frame.
A short sale isn’t a contingency. It happens when a seller falls behind on mortgage payments. With a short sale, the seller works with the lender to sell their home for less than it may be worth. This prevents the lender from having to take possession of the home (aka foreclosure) to sell it.
If the seller accepts a purchase offer and the lender vetoes it, the house may go back on the market, and the seller can consider other offers.
Change of heart
Sometimes sales fall through for reasons that aren’t related to the home. Maybe the buyer suddenly gets that dream job in a different city and has to relocate, so they back out of the deal. Or maybe the couple planning to buy a house break up, and their plans change. In those rare cases, those homes will likely go back on the market.
Can You Still Put an Offer on a Pending House?
Still obsessing over your dream house with that “pending sale” sign in the front yard? Good news: You can make a backup offer on a house that is pending or under contract.
A backup offer is similar to a standard offer. You acknowledge that the home is currently listed as “pending,” but you want to make an offer in case the pending offer falls through.
Sellers may be receptive to a backup offer because it saves them the time and trouble of relisting their home. But you run the risk of putting in an offer on a home with a hidden problem. Or you may end up dealing with a seller who has unrealistic expectations or isn’t willing to negotiate.
Pending houses may be tempting, but you must recognize the risk in that temptation. It’s a little like being the lead in a rom-com. You spend so much time dreaming about your version of “perfect” that you miss out on what’s been right in front of you the entire time.
That’s why it’s a good idea to listen to your agent and other people involved in the buying process before you make the leap and put in an offer on a pending house.
How Can I Buy a ‘Pending Sale’ or ‘Under Contract’ House?
If you’re head-over-heels in love with a “pending sale” house and want to put in a backup offer, don’t walk into the process blinded by love. Equip yourself with the knowledge you’ll need to make it work for you.
Contact the listing agent
Ask your real estate agent to connect with the listing agent. They’ll know what’s going on with the sale and give your agent tips on what the seller doesn’t like about their current offer.
Try asking the listing agent to schedule a viewing of the home. If the listing agent agrees to show it to you, that might be a sign that the pending sale is close to falling through.
You can make an offer, but be forewarned, you might not be first in line. The seller’s listing agent might inform you that there are multiple offers ahead of yours. That could make it harder for your backup offer to get accepted. Or it could require that you make a more generous offer than you’d originally planned.
Gathering this intel will help you develop a stronger backup offer.
A loan preapproval will help you come in better prepared to make an offer. A preapproval signals to the seller that you’re serious about buying – and you have financing options. A preapproval carries a lot of weight because it signals that a lender has reviewed and verified your finances and has pulled your credit report to confirm your creditworthiness. It also tells sellers how much money the lender is willing to lend.
Put in a backup offer
After you talk to the listing agent, use the knowledge you and your real estate agent gathered to put together the strongest offer. If it’s a seller’s market (think: housing demand exceeds housing supply), you may need to offer more money before the seller will even look at you as a potential buyer.
You may also want to consider removing contingencies like the home inspection. Some risks come with this strategy, but the more appealing your backup offer is, the better your chances to grab the home if the pending sale falls through.
From Pending to Sold and Everything In Between
Pending sale can mean a variety of things. What it means for you will depend on whether you’re the seller, buyer or lender. Knowing how pending sales work, what makes them different from under-contract sales and knowing how to buy a house with a failed contract should assure you that all is not lost when you come face to face with a “sale pending” or “under contract” sign.
National Association of REALTORS®. “REALTORS® Confidence Index.” Retrieved January 2022 from https://www.nar.realtor/research-and-statistics/research-reports/realtors-confidence-index