Existing home sales came in at a whopping 6,850,000, beating estimates with the highest print since 2006. Days on market fell from 36 days to 21 days on a year-over-year basis. Cash buyers remain at
Everything You Need To Know About A Pending Home Sale
Dated: February 12 2019
Few home sales fall through once they reach pending status, but that doesn't mean all parties don't have plenty of work to complete before closing day.
Few moments are as exciting for both a home seller and homebuyer than the moment that “sold” badge is added to the For Sale sign in front of your property. But when you drive through neighborhoods, especially as you’re house hunting, you may see the occasional “sale pending” badge posted instead.
But what does it mean when a property is pending?
A pending home sale takes place after the seller has accepted an offer and the contract between both parties has been signed. When a home sale is pending, it is no longer considered an active listing on the local multiple listing service, which is where agents provide information on available properties. Public sites for marketing properties, including Zillow, Trulia and Redfin, also pull listing information from the local MLS. When a property is taken off the market on the MLS, its availability is also removed from those websites.
When a deal is considered pending may vary depending on where you live. In some cases, this could include the due diligence period, where the property undergoes an inspection and a public record check is done to make sure there are no legal issues. In other markets, the pending phase could start after that due diligence phase. Regardless, pending home sales are also considered a key indicator of market activity. Economists and other real estate professionals keep tabs on the Pending Home Sales Index, measured and reported by the National Association of Realtors, which measures the number of pending properties on the market each month.
Here’s what a home's buyer, seller and other interested homebuyers on the market need to know about the pending sale process.
Buyer's Role With a Pending Sale
With an offer accepted, the real work for the buyer begins. The best way a buyer can prepare for this stage is have the necessary professionals on hand, from the mortgage lender and title insurance company to the real estate agent and inspector. Lisa Lippman, a licensed associate real estate broker for Brown Harris Stevens in New York City, stresses that having a real estate attorney will also be key to completing the legal documentation in time for closing.
In most markets, the due diligence period occurs in the 10 days after the contract is signed. The formal application for the loan is submitted to the mortgage lender to issue an appraiser to research the house and the area to determine the property's market value. Separately, an inspection should be scheduled, and typically a real estate attorney will explore public documents on the property to discover any other details, like an easement for future road widening, that could affect the deal.
This is the perfect moment for the buyer to examine all the fine details of the house and transaction and determine what’s a deal breaker, explains Toni Mikel, owner and broker of Bluebird Real Estate in Portland, Oregon. “Once it’s pending, then the buyer can ask their questions,” she says.
If everything checks out and both parties either negotiate on or agree to waive the contingencies regarding the inspection or appraisal, you may find yourself simply waiting for closing day.
But there’s still work to be done. Keep in contact with your mortgage lender to ensure you’ve provided all the right financial documents and that there are no issues with the mortgage underwriting. A delay could push back your closing date, which can cause problems for both the buyer and seller.
In some places, like New York, due diligence is conducted before the property goes under contract, and the focus during the pending period is on getting approval from the building's governing body. If the home you’re buying in part of a homeowners association, condominium community or cooperative, you’ll need to receive information about the association or board. In a co-op situation, the board will also need to approve you as a future resident.
Co-ops are most popular in New York City, but they exist in other major cities with apartment buildings owned collectively by the residents. When one shareholder sells their home, the board vets buyers to ensure they are financially able to maintain the property – and in some cases get along with other residents on a personal level.
Lippman says the selectiveness of a co-op board varies widely from building to building. An interview and even pet approval may be required by one board, while another may simply need to examine the buyer's broad financial history. While the board’s dislike of a buyer typically doesn’t torpedo a deal, it can, Lippman says.
“I would say nine out of 10 deals get past the board,” she says. “(A denial is) not rare, but it’s not really common.”
A condo association board also has the potential to dismantle a deal, but because the buyer will actually own the property, the board would have to purchase the home from the seller in that case, Lippman says. As a result, you’re less likely to see deal-breaking issues coming from a condo or HOA board.
Seller's Role With a Pending Sale
While the buyer is at work throughout the pending process, the seller has more time to relax. “After the contract is signed, all the seller has to do is wait,” Lippman says.
The listing agent typically schedules the inspection, appraisal or any other visits to the property, but the seller may need to be present to let people in, choose to witness the inspection or opt to be out of the house for all of it.
However, Mikel stresses that the seller should be sure about the deal before it becomes a pending sale because at that point he or she doesn’t have the ability to back out of the deal – only the buyer is legally able to cancel the contract with no real cause needed.
With negotiations stemming from issues found in the due diligence process, “the seller then gets to decide what they want to say yes to,” Mikel explains. A seller can refuse to negotiate on price if the property appraises for less or decline to make needed repairs that surface in the inspection, but Mikel points out that if the seller appears to purposely be trying to make the buyer back out, it could lead to a lawsuit for breach of contract.
Of course, negotiations can fall apart easily if tempers flare on either side. “Some get very emotionally involved and will blow a deal over $500,” Mikel says.
Key to making sure a deal doesn’t fall apart while it’s pending is having a listing agent who can keep you calm and effectively communicate with the buyer’s agent. “It really depends on the experience level of the agents involved,” Mikel says.
The final step in the pending process – and to make sure the closing goes smoothly – is to move out and leave the house in clean condition. The buyer will do a walk-through a couple days before closing. By then, Lippman recommends that her sellers hire a cleaning crew.
“They should leave it a little bit more than broom clean,” she says. When it’s dirty, the buyer may look at details a little more carefully and find issues with nail holes or minor scuffs they wouldn’t have pointed out otherwise.
Interested Buyer on the Market and a Pending Sale
You’re house hunting and the property you had hoped to make an offer on just went pending on the local MLS. Can you still make an offer that the seller may like more?
Typically, the listing agent is no longer accepting offers once the property is listed as pending sale, so you won’t be able to place your bid.
But real estate deals can fall through for a variety of reasons, so a pending sale isn’t a done deal. While you may not be able to submit a formal offer while the deal is pending, you can have your agent get in touch with the listing agent to inquire about the deal and potentially get a heads-up if the property goes back on the market so you can make an offer before other buyers.
Counting on a deal to fall through may not be the best use of your time as a house hunter. Real estate information company Trulia reports that 3.9 percent of home sales failed in 2016, which was an increase from previous years but still a small share of the market. If a deal falls through because of some sort of previously undiscovered issue, such as liens on the property or sudden damage to the house, it may be less desirable to you as well.
For Mark Ross, founder of Ross NW Real Estate and professional real estate broker, real estate has always been the career of choice. During his 25+ years in the industry, Mark has gained experience in....
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