Pending vs. Under Contract: What These Mean for Buyers

Once you’ve made an offer on a new home, you might be wondering what happens next. It’s helpful to familiarize yourself with what you can expect so there are no surprises along the way. 

We’re here to provide an inside look into what it means when a sale is pending vs. under contract, and how these two terms differ.

Pending vs. Under Contract 

After an accepted offer, real estate can either be pending or under contract. Let’s define each one.

What Does Pending Mean? 

In a real estate transaction, pending means that a seller has accepted a potential buyer’s offer on their current home. A property is considered to be a pending sale when the contingencies or requirements have been met. Because the deal is not finalized yet, this explains why the property is listed as “pending” rather than “sold.”

This means that the listing status is no longer active on real estate listing websites, such as Aalto or the Multiple Listing Service (MLS), and stops other interested parties from making an offer on the property. At this point, the home seller and buyer are waiting for the close of the sale on the property and the sale is likely to go through, unless unforeseen circumstances arise.

What Does Under Contract Mean? 

Meanwhile, under contract means that the buyer has made a formal offer and the seller has accepted their offer, but there are still outstanding conditions that must be met before the sale is finalized. This typically is an early stage of the homebuying process and signifies the start of the sale process. 

As a prospective buyer, you might encounter the terms “active under contract,” in addition to under contract. A listing status that is active under contract simply means that the seller is still accepting backup offers. 

Differences Between Pending vs. Under Contract

While pending vs. under contract might seem similar in nature, there are a few key differences worth noting. 

Contingencies 

The primary difference between a pending status and an under contract status comes down to contingencies. 

A sale pending property means that all the contingencies have been successfully fulfilled. Contingencies are a common part of real estate contracts and lay out certain stipulations that must be met in order for the sale to go through. Some of the most common contingencies include: 

• Appraisal contingency
• Loans and financing contingency
• Home sale contingency
• Inspection contingency 
• Mortgage contingency

Contingencies allow the buyers to withdraw their offer on the house if the agreed upon terms and conditions are not met — without losing their earnest money deposit. 

Backup Offers

If you’re wondering whether it’s too late to make a backup offer on a pending property, the answer is most likely yes. 

A pending offer means that the seller and buyer have negotiated an accepted purchase contract. Making an offer on a sale that is pending is unlikely as many sellers no longer want to accept additional offers at this point in the process. 

When it comes to a property that is under contract, however, there’s a higher possibility of a prospective buyer putting in an offer. Unless there is a clause preventing it, the seller has the option to continue marketing the property and showing it off to interested parties. If you were to make an offer at this point, you will be making a backup offer. 

A backup offer is a legally binding contract that says the backup buyer will be next in line if the first offer falls through. If the first buyer cancels, the second buyer will automatically enter escrow on the property.

When looking at listings online, be sure to look at the status of each property. The majority of real estate sites will note the status of each listing so you can tell whether a property is contingent vs. pending vs. under contract.

Questions Around Pending vs. Under Contract

Now that you understand what pending vs. under contract means and some of the key differences between them, here are some common questions you might be wondering. 

Are They Different Stages of Purchase? 

To put it simply, pending vs. under contract refers to the stage in the homebuying process. 

A sale is first listed as under contract and once the stipulations have been successfully met, it is then considered a pending sale. Once the buyer and seller have agreed on all the terms and conditions, the property will change from “active” to “under contract” or “pending” on real estate listing websites. 

A property that is pending is much closer to being sold than one that is under contract. 

Do Pending Sales Ever Fall Through? 

While it does not commonly happen, it is possible for a pending sale to fall through and dissolve. There are a few reasons why a pending sale may come off the market, including: 

• Issues discovered during home inspection. It’s not uncommon for a home inspection to turn up issues, but if it reveals anything major, it could lead to pending home falling through. If there are any concerning problems, such as issues relating to the structure or HVAC system, a prospective buyer might ask the seller to make those repairs or lower the sale price. Alternatively, if they have a home inspection contingency, they might back out of the contract. 
• Financing issues. Most buyers will contact a lender to get a pre-qualification or pre-approval letter, which states the amount of loan they’ve been approved for. However, neither of these letters is a guarantee of a loan. Occasionally a buyer’s financing falls through as they are waiting for the sale to finalize, which can be a result of a low credit score or the debt-to-income ratio being too high. 
• The appraisal price is lower than the sale price. Another reason that a pending property might fall through is that the appraisal price is lower than the sale price. Appraising is the process of evaluating the value of a property. If the appraisal comes back low, a buyer can try to negotiate a lower sale price with the seller or walk away from the deal.

Find Your Dream Home With Aalto

Whether you’re interested in buying or planning to sell, it’s helpful to educate yourself on common real estate terms.

Aalto is transforming the process of buying a home through our innovative platform, so you won’t need to hire a traditional real estate agent. Our user-friendly marketplace allows prospective buyers to browse homes for sale online, and access all information on any home so you have total transparency into the property. Those who buy with Aalto can look forward to strengthening their offer with up to 1.5% cash back on any home! 

Start the journey to finding your dream home and sign up with Aalto today.