Real Estate 101: What Does Pending Mean In Real Estate?
Whether you’re looking to buy a home or preparing to sell your home, you’ll most likely have some questions — especially if you fall in the category of first-time home buyers or home sellers. One question you might have is, “What does pending mean in real estate?” Here’s an inside look into pending transactions and common questions you might have.
What Does Pending Mean In a Real Estate Transaction?
In real estate, the term “pending” is used when a seller has received and accepted an offer on their home. Since the sale is not yet finalized, the listing is still considered to be in pending status. This typically means that common contingencies have been met and the home is under contract with a potential buyer. A pending status is normally the last stage of the closing process. This happens in every real estate transaction, whether it’s a buyer’s market or a seller’s market.
The National Association of Realtors, commonly referred to as NAR, has a Pending Home Sales Index (PHSI) to track home sales that have been signed, but not yet closed. It’s one of the largest informational sources of housing sales as it draws information from over 100 multiple listing services. If you’re in the market to buy, there’s still a chance that you might be able to make an offer on a home that is pending.
The Pending Sales Process
Now that we’ve answered the question “what does pending mean in real estate,” you might be wondering how long it takes to go from pending status to officially sold.
Length of Pending Sales
The timeframe of a home being in pending status varies from each real estate transaction, which means that there is no hard and fast timeline. However, typically this step can take anywhere from a couple of days to a couple months.
Reasons a Pending Offer May Fall Through
It’s not uncommon for pending real estate listings to fall through. This can happen due to a number of factors. Here are some of the most common reasons:
- Home inspection fails
- Incomplete paperwork
- Repairs needed before selling
- Potential buyer decides to opt out of the sale
- Contingencies are not satisfied
Another one of the most common reasons that a pending home sale might fall through is if the buyer encounters issues with financing. Research by the National Association of Realtors found that 78% of home buyers finance their homes. Occasionally, potential buyers — especially if it’s a first-time home buyer — are unable to secure financing, qualify for a loan, or obtain a pre-approval letter from their lender, which can result in the home sale falling through and being re-listed.
The Role of the Seller vs. Buyer in Pending Sales
Here’s a closer look at what’s expected of the buyer and seller during a home sale when they are in pending status.
Role of the Buyer
While both the seller and potential buyer have a part to play in the pending home sale, the majority of responsibility falls on the buyer. This is the time for the buyer to get all the necessary documentation in order, spanning from the mortgage lender documents to the title insurance company to the home inspection reports. This is one of the most important steps in the home buying process.
Role of the Seller
At this time, the home seller has accepted the buyer’s offer and the contract has been signed, which means that the home seller’s main job is to wait for the sale to close and allow the buyer to do their due diligence. However, should any problems arise with the potential buyer or their offer, the seller has the option to continue showing the home to other interested parties.
Common Questions With Pending Sales
Read on for some of the top common questions that buyers, sellers, or interested parties may have when a listing has been moved to a pending status.
What’s the Difference Between Pending Status and Contingent Status?
Although the pending status and contingent status are two terms that often go hand in hand, there are key differences between the two.
A house that is listed as contingent means that the home seller has accepted an offer, but they’ve decided to keep the listing active as a safeguard if potential buyers are unable to meet contingencies.
Buyers also have the option to add contingencies into their offer. This refers to stipulations that must be fulfilled in order for the home sale to go through. This provides a way for a potential buyer to back out of the deal without consequences if unforeseen circumstances arise.
Some of the most common contingencies include:
- Home sale contingency
- Financing contingency
- Home inspection contingency
- Appraisal contingency
Meanwhile, if a property is listed as a pending status, this means that the contingencies were successfully met and the home sale is being processed. A pending sale means that all the terms and contract work have been met.
What If I’m Interested in a Home With a Pending Status?
Although it isn’t common, occasionally a potential buyer will find themselves interested in a property that has a pending status. If you find yourself in this situation, you might be wondering if it’s too late to make an offer.
The answer is no, it’s not too late. Since pending sales are not final, there is still an opportunity for an interested potential buyer to insert themselves — but only if the seller has added a kick-out clause in the transaction. In this situation, it’s best not to get your hopes up as the chances of the sale falling through are minimal.
As a Seller, How Do I Prevent a Pending Sale From Falling Through?
While it’s not possible to entirely prevent pending home sales from falling through, there are some proactive measures that home sellers can take to reduce the chances.
Although the pending offer price is important, take other factors into consideration. For example, what contingencies are listed — is it a sale contingency, financing contingency, appraisal contingency, or something else? How will those contingencies affect your ability to close quickly?
Keep in mind that as the home seller, you are not obligated to accept a home sale offer with contingencies. If the potential buyer has a home sale contingency, the seller might consider adding a “kick-out clause” in the contract. According to Investopedia, a kick-out clause enables the home seller to accept the offer but continue marketing their house and accepting additional offers from other interested buyers. Sellers often do this in an attempt to receive a non-contingent offer.
Kick-out clauses happen more frequently in buyer’s markets than a competitive market as a safeguard for home sellers who do not want to be locked into a lengthy home sale process.
Prepare to Find Your Dream Home
Now that we’ve answered the question “what does pending mean in real estate,” you’re equipped with the knowledge to successfully navigate pending sales. They happen in every real estate transaction, so familiarizing yourself with this common real estate term can make you look like you know what you’re doing (even if it’s your first time).
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Aalto is a real estate broker licensed by the State of California, License #02062727 and abides by Equal Housing Opportunity laws. This article has been prepared solely for information purposes only. The information herein is based on information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy of the information. Aalto disclaims any and all liability relating to this article.