When purchasing property, “under contract” and “pending” are two terms you’ll hear frequently.
Trust me: they can be quite confusing.
Are they the same?
Are they different?
While these terms may seem similar, they have two very different meanings. Here’s the difference between under contract vs. pending sale and what they mean in real estate.
Under Contract vs Pending: What’s the Difference?
Both “under contract” and “pending sale” imply that the seller has accepted an offer.
However, there are several differences between these two terms that are important for any real estate investor to know.
What is Under Contract?
When a home is under contract, it means that the seller has formally accepted an offer from a potential buyer.
However, there are still several steps remaining before the sale can close.
In most cases, there will still be contingencies before the purchase can be finalized.
For example, the home may need to pass an inspection or undergo repairs first.
The buyer may also need to sell a previous property or find another form of financing to finalize the purchase.
If these contingencies aren’t met, the sale won’t go through.
Some sellers may still look for backup offers while a property is under contract, just in case something changes and the sale doesn’t happen.
What is Pending?
When a property is pending, it has moved to the next stage of the selling process.
Any contingencies that were initially set out in the contract have been taken care of, and both buyer and seller are preparing to finalize the sale.
During this stage, both parties will need to work with their real estate agents, lenders, and any other third parties involved to make sure all remaining details have been taken care of.
This includes getting the mortgage approved, finalizing the title, and preparing any other relevant documents.
At this point, the property is no longer available and the seller won’t be conducting showings or accepting further offers.
The property also won’t be active on the MLS.
Example of Under Contract vs Pending
Example of a property under contract: A seller has accepted an offer for a property, but the buyer still needs final approval for a mortgage.
The buyer also needs to conduct a full inspection and title search for the property.
The property is still listed in the MLS, but it’s labeled “under contract”.
The seller and their agent may be willing to discuss backup offers.
Example of a property pending sale: The buyer has finalized their mortgage options, and the seller has fulfilled any inspections and other contingencies required on their end.
Both parties are working with their agents to complete the appropriate paperwork and finish the sale.
The property is no longer visible on the MLS.
Frequently Asked Questions
Q. Can you make an offer on a house that is active under contract?
Just because a property is active under contract does not mean the sale has gone through yet.
In many cases, you can still make an offer at this stage.
If you see a property you love that’s currently under contract, reach out to the owner or their agent to learn more about the current situation and see if they are open to back-up offers.
In many cases, sellers will be very amenable to back-up offers, especially in a competitive market. This means they don’t have to start from square one if the sale falls through.
When making an offer for a home that’s currently under contract, fair pricing and flexibility is key. You’ll want to make your offer as attractive as possible, since you’re competing with another buyer.
Q. How often do contracts fall through?
In real estate, contracts fall through more often than you might think. Some estimates indicate that 5% of all offers fall through rather than closing.
There are many reasons why a sale might fall through in real estate. This usually happens when one party cannot meet contingencies outlined in the initial contract. For example, the buyer may conduct an inspection, only to find issues with the home that the seller did not disclose.
Financing is another reason why many contracts fall through. Even with a pre-approval, the buyer may not be able to get a loan that fits their needs in time, which ultimately prevents the deal from closing.
Q. Can a seller accept another offer while under contract?
Yes, it’s possible for sellers to accept backup offers while under contract. Many sellers will do this if they suspect that the original offer might not pan out the way they had hoped. A backup offer does not supercede the initial offer — it’s only accepted if the initial sale does not work out.
Some sellers will require a kick-out clause as part of their contract.
With a kick-out clause, the seller has the right to change their mind and accept another offer, even after the home is under contract.
The Bottom Line: Under Contract vs Pending
“Under contract” and “pending sale” are two must-know terms for any real estate investor.
They are both key stages in the purchasing process.
When a home is under contract, there are still many steps to take before the offer is finalized. When a home is pending sale, the deal will go through — it’s just a matter of finalizing paperwork.
