Under Contract vs. Pending: A Home Buyer’s Guide to Status Tags
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Richard Haddad Executive EditorClose
Richard Haddad Executive EditorRichard Haddad is the executive editor of HomeLight.com. He works with an experienced content team that oversees the company’s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.
Searching for a home to buy can be a time of excitement and anxiety. You may be building an online watchlist of homes you’re interested in seeing, but then you notice a label tagging your favorite property listing as “under contract” or “sale pending.” You wonder, what’s the difference between under contract versus pending?
Can you make an offer on a home that’s under contract? What buyer contingencies might put a listing back on the market? What home contingency missteps should you avoid when making an offer?
In this post, we’ll explain terms like “under contract,” “sale pending,” and “active under contract” and how they might impact your home-buying journey.
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What does ‘under contract’ mean when buying a home?
When you find a home listing marked as “under contract,” it indicates that the seller has accepted an offer from a buyer, but the sale is not yet final. While under contract, there are typically contingencies in the buyer’s offer that need to be resolved before the sale moves forward. If contingencies are not met, the deal might fall through.
Contingencies while ‘under contract’
Here are some common types of contingencies in residential home sales:
- Financing contingency: A financing or mortgage contingency safeguards buyers who need to finalize a home loan. If the buyer fails to secure financing, they can withdraw without losing their deposit.
- Appraisal contingency: Lenders typically require an appraisal to confirm the home’s value before approving a mortgage loan. An appraisal contingency allows the buyer to either renegotiate their offer or freely walk away from the agreement if the appraisal comes in under the contracted offer price.
- Inspection contingency: This contingency clause allows the buyer to have a professional inspection of the property and then decide whether to move forward with the purchase. Significant issues discovered can lead to renegotiations, repairs, or even contract termination without consequences for the buyer.
- Home sale contingency: A home sale contingency says that if the buyer doesn’t sell their current home before a specific date, then the contract can be terminated without penalty. Making an offer contingent on the sale of an existing home is often necessary for buyers who need to use equity to afford the down payment or closing costs on a new house. Sellers are often wary of this clause.
Can I make an offer on an ‘under contract’ home?
While a home is under contract, it’s still possible, though less likely, for other offers to be considered. If contingencies fall through and the initial deal collapses, the property may become available again. However, it’s important to have realistic expectations and continue exploring other options in your home search.
What does ‘sale pending’ mean when buying a home?
When a home is marked as “sale pending,” it indicates that all the contingencies of an offer have been successfully met, and the sale is moving closer to finalization. Unlike properties under contract, a pending sale is further along in the transaction process. Here’s what this status typically implies:
- Fewer obstacles: All major hurdles, like inspections, appraisals, and financing, have been cleared.
- Closing phase: The parties are now in the final stages of the transaction, preparing for the actual transfer of ownership.
Can I make an offer on a ‘sale pending’ home?
While it’s technically possible to make an offer on a home with a pending sale, the likelihood of it being considered is quite low. At this stage, the seller and buyer have resolved most, if not all, of the contingencies, and are just steps away from closing. Here are a few points to keep in mind:
- Backup offers: Some sellers may still accept backup offers in case the current deal falls through at the last minute.
- Low probability: However, since the sale is nearing completion, the chances of the original agreement collapsing are minimal.
- Focus on other listings: It’s often more productive to direct your attention and resources toward other properties that are actively seeking offers.
What does ‘active under contract’ mean when buying a home?
“Active under contract” is a somewhat unique status in real estate transactions because it indicates the seller has accepted a purchase offer, but they are still open to backup offers. Here’s more about what this listing tag generally means:
- Continued marketing: While an offer has been accepted, and the property is under contract, the seller continues to show the home and is welcoming backup offers. This is often because the seller is not 100% confident in the offer from their current buyer, which may include contingencies that make the seller uneasy.
- A middle ground: This status is somewhere between “under contract” and “sale pending.” The seller is cautiously optimistic about the current offer but remains open to alternatives. They may want additional options because of their own moving or home-buying plans.
Can I make an offer on an ‘active under contract’ home?
Yes, you can still make an offer on a home that’s “active under contract.” Here are some points to consider:
- Backup position: Your offer would likely be considered as a backup, stepping in if the current deal falls through.
- Evaluate the situation: Understand the existing contingencies and assess the likelihood of the current purchase offer not closing.
- Stay informed: Have your agent keep in touch with the listing agent so you can stay updated on the status of the current contract.
How often do offers fall through, and why?
Not every purchase offer leads to a successful home sale. While most home sale contracts typically close within a range of 30 to 47 days, they can face delays or even termination. According to data from the National Association of Realtors (NAR) most recent Realtors® Confidence Index Survey:
- Terminated contracts: About 6% of contracts are terminated.
- Delayed settlements: Around 16% of contracts experience delays in settlements.
- Appraisal-related delays: 7% of contracts have delayed settlements specifically due to appraisal issues.
In an earlier Realtors® Confidence Index Survey where contract cancellations were examined in more detail, the NAR found that the most common reasons home purchase contracts are terminated include:
- Home inspection issues: These account for 25% of terminations. Problems uncovered during inspections can be significant enough to halt a sale.
- Financing issues: 21% of terminations are due to financing problems, such as loan denials or changes in the buyer’s financial situation.
- Appraisal issues: Making up 15% of terminations, appraisal issues arise when a home’s appraised value doesn’t match the agreed selling price.
- Contingency issues: These contribute to 5% of contract terminations. Contingencies like those for selling a current home can sometimes not be met.
- Title or deed issues: Accounting for 3% of terminations, these problems can arise from legal issues related to property ownership.
- Employment changes: Loss of employment affects 2% of terminations, impacting the buyer’s ability to secure financing.
- Other issues: Making up 29%, this category includes a variety of less common reasons.
What causes home offers to be rejected by sellers?
According to a recent HomeLight survey of more than 1,000 top real estate agents across the country, here are the most common reasons sellers are leaving the negotiation table:
- Low offers: 60% of agents say buyers are offering too far below the listing price.
- Too many contingencies: 21% of agents cite buyers are including too many contingencies in the offer.
- Nervous or hesitant buyers: 12% of agents say buyers are waiting too long or feeling too nervous to commit.
FAQs about contingent offers
- Should I make an offer that includes a home sale contingency?
Making an offer with a home sale contingency is advisable if you cannot proceed with the purchase without selling your current home, but be aware it may weaken your offer’s attractiveness to the seller. One way to bypass this concern is with a Buy Before Your Sell program from a real estate solutions company like HomeLight. (More on this below.) - Can a seller negotiate my contingent offer?
Yes, a seller can negotiate your contingent offer, including the terms of the contingency and other aspects of the sale agreement. - How can I make my contingent offer stronger?
Strengthen your contingent offer by offering a higher purchase price, flexible closing dates, or a larger earnest money deposit. - If my contingent offer is accepted, what happens to the listing?
If your contingent offer is accepted, the listing status typically changes to “under contract” or “active under contract,” indicating that the home has an offer but with specific contingencies to be met.
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