When navigating the world of real estate, buyers and sellers often encounter terms like under contract and pending. While these phrases are sometimes used interchangeably, they actually refer to different stages in the home-selling or buying process. Understanding the distinction between under contract vs pending can help you make informed decisions, set realistic expectations, and better interpret real estate listings. This comprehensive guide explores what each term means, the differences between them, and what buyers and sellers should know at each stage.
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What Does "Under Contract" Mean?
Definition of "Under Contract"
When a property is listed as under contract, it signifies that the seller and the buyer have entered into a binding agreement—typically a purchase and sale contract. This means the buyer has made an offer that the seller has accepted, and both parties have signed a legally binding contract outlining the terms of the sale.
The under contract status indicates that the property is no longer actively available for other buyers, although certain contingencies or conditions might still need to be satisfied before the sale can close.
What Happens During the Under Contract Phase?
During this period, several important steps occur:
- Inspection and Appraisal: The buyer typically arranges for inspections (home, pest, etc.) and an appraisal to assess the property's value.
- Contingencies: The contract may include contingencies such as financing approval, home inspection results, or sale of the buyer's current home.
- Negotiations: If issues arise during inspections or appraisal, negotiations may occur to address repairs or price adjustments.
- Loan Processing: The buyer's lender processes the mortgage application, which can take several weeks.
The duration of the under contract status depends on how quickly the contingencies are satisfied and whether any issues delay the process.
Risks and Protections During Under Contract
While a property is under contract, buyers are generally protected by the contingencies included in the contract. If significant issues arise—such as the home inspection revealing major problems—the buyer often has the right to negotiate repairs, request credits, or even back out without penalty if contingencies are not met.
Sellers, on the other hand, are expected to hold the property off the market during this period, although the specifics depend on the contract terms.
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What Does "Pending" Mean?
Definition of "Pending"
The term pending indicates that all contingencies have been satisfied, and the transaction is moving toward closing. In most cases, pending status means the property is essentially sold, and the escrow or closing process is underway.
In other words, pending signifies that both parties are in the final stages of completing the sale, and the property is unlikely to become available again unless issues arise during closing.
What Happens During the Pending Phase?
During the pending stage, the following activities typically occur:
- Final Walk-Through: The buyer conducts a final inspection to ensure the property is in the agreed-upon condition.
- Closing Preparations: The title company or escrow officer prepares necessary documents, and the buyer arranges for funding.
- Funding and Title Transfer: The buyer's funds are transferred, and the title is officially transferred from seller to buyer.
- Recording of Deed: The transaction is recorded with the local government, completing the transfer of ownership.
Once these steps are completed successfully, the property moves from pending to sold.
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Key Differences Between "Under Contract" and "Pending"
While both terms describe stages in a real estate transaction, they have distinct meanings and implications:
Contingencies and Conditions
- Under Contract: The property is under a binding agreement but may still be subject to contingencies such as inspections, financing, or appraisal. The sale is not yet guaranteed.
- Pending: All contingencies have been satisfied or waived, and the transaction is progressing toward closing.
Availability of the Property
- Under Contract: The property is typically off the market but might still be available if contingencies fall through.
- Pending: The property is generally considered sold, with the closing process underway. It is rarely available for viewing or offers.
Implication for Buyers and Sellers
- Under Contract: Buyers may still back out if contingencies aren't met; sellers are protected but still need to wait for contingencies to resolve.
- Pending: The sale is almost finalized; buyers are preparing for ownership transfer, and sellers are close to closing.
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Common Misconceptions and Clarifications
- Are "Under Contract" and "Pending" interchangeable? Not exactly. While both indicate a property is in the process of being sold, under contract usually precedes pending, with contingencies still in place.
- Can a property go back on the market after being under contract? Yes, if contingencies are not met or if the buyer or seller backs out, the property can be relisted or go back to active status.
- Is a property still available during the pending stage? Generally no, but in rare cases, if the transaction falls through, it may return to active status.
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What Buyers and Sellers Should Know at Each Stage
For Buyers
- During Under Contract: Be aware of contingencies and timelines. Avoid making other offers unless the contract allows it.
- During Pending: Prepare for closing. Conduct final inspections and ensure all documentation is in order.
For Sellers
- During Under Contract: Keep the property off the market. Address any issues that might delay closing.
- During Pending: Coordinate with the closing agent. Prepare to transfer ownership and handle final details.
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Conclusion
Understanding the difference between under contract and pending is essential for anyone involved in real estate transactions. While both stages indicate progress toward a sale, they reflect different points in the process and carry different implications for the involved parties. Recognizing these distinctions helps manage expectations, anticipate next steps, and navigate the transaction smoothly.
Whether you're a buyer eager to finalize your purchase or a seller preparing for closing, knowing where a property stands—under contract vs pending—can make all the difference in your real estate journey. Keep in mind that these stages are part of a complex process with many moving parts, so staying informed and in communication with your real estate agent is key to a successful transaction.
Frequently Asked Questions
What is the main difference between 'under contract' and 'pending' in real estate?
'Under contract' indicates a seller and buyer have agreed on terms, while 'pending' means the sale is in progress and awaiting closing, with most contingencies resolved.
Can a property be both 'under contract' and 'pending' at the same time?
No, typically a property is either 'under contract' or 'pending.' 'Pending' usually signifies that all contingencies are being fulfilled, leading to the closing process.
How long does a property usually stay 'under contract' before it becomes 'pending'?
The transition from 'under contract' to 'pending' varies but generally occurs within a few days to a couple of weeks once all contractual conditions are met.
Is a property still available for purchase once it is marked 'pending'?
No, once a property is 'pending,' it is generally no longer available for offers, though it can fall back on the market if the deal falls through.
What should buyers know about purchasing a property that is 'under contract'?
Buyers should be aware that the deal is in progress, and contingencies like inspections or financing are being addressed; delays or cancellations can still occur.
Can a seller back out of a sale if a property is 'under contract' or 'pending'?
Yes, but it depends on the contract terms. Typically, once under contract or pending, there are legal obligations, but contingencies or breaches can allow a seller to withdraw.
How do 'under contract' and 'pending' status affect a buyer’s ability to make an offer?
When a property is 'under contract' or 'pending,' it is usually off the market, so other buyers cannot submit offers unless the deal falls through or is canceled.
