House Under Contract vs Pending: What’s the Difference?

It can be frustrating to understand the terminology of real estate agents and transactions.

Real estate transactions come with a book-shelf of terminology for buyers and sellers to digest. It’s not easy for everyday people to understand the subtle intricacies of industry terms, especially if you want to sell your house fast. So we’ve decided it’s time to settle the bill on two of them.

One of the most frequent questions we receive from buyers is the difference in the meaning of “under contract” and “pending” when a property is listed for sale.

What makes the situation understandably confusing for buyers, is that terms like under contract vs pending are used interchangeably under different listing platforms, different states, and across different markets.

We’re here to settle the war of words. But make no mistake, both expressions have related meanings.

In the same way that “aqua” and “cyan” refer to similar colors, “pending” and “under contract” refer to similar stages in a real estate transaction.

But in either case, they’re not exactly the same thing.

To better understand, it’s necessary to grasp the process of a real estate transaction.

Key Takeaways:

  1. Different Stages in Sale Process: “Under contract” means a buyer has made a formal offer and entered a contract with contingencies; “pending” implies contingencies are met, and the sale is closer to completion.
  2. Contingent Sales: A sale listed as “contingent” depends on another factor, like the buyer selling their current home.
  3. Reasons Sales Fall Through: Sales can fall through due to financing issues, due diligence findings, or unmet contingencies.
  4. Making Offers on Pending or Under Contract Homes: It’s possible to make an offer on these homes, but sellers are usually bound by the initial contract.
  5. Real Estate Terms: Real estate transaction terms can be confusing due to their interchangeable use across different platforms and states.

How do Real Estate Transactions Work?

In a world where homes are bought and sold over a simple handshake and a cup of tea, the differentiation between the two terms would be benign.

But real estate transactions are a little more complex than that. Let’s take a look at what the process usually looks like.

1.  A buyer finds a property they wish to purchase

2.  The buyer makes a formal offer

3.  The buyer and seller negotiate over price and the time to close on the deal

4.  The seller accepts the offer

5.  Both parties enter a contract, typically contingent on financing and a due diligence period

6.  The buyer’s earnest money is held in an account, such as an escrow

7.  The buyer moves to secure financing for the transaction

8.  The property undergoes inspection and appraisal

9.  The deal is closed

Among the various stages, there is far greater room for unique conditions than buying a candy bar at your local convenience store. That’s because property is a heftier purchase with greater risk, and each step is typically tailored to the unique circumstances under which each transaction takes place.

What About Multiple Listing Service?

As a sale progresses through each stage, the seller’s real estate agent controls the status of the property in the MLS. This information is then fed directly into other real estate websites.

Terms like under contract vs pending may be differently interpreted by various real estate platforms.

Sale Pending vs. Under Contract

These two terms could suggest that a property appears to be off the market, but this is not true.

Only when the property is sold, and the deal legally finalized by agreement of the buyer, seller, and financial lender, will it be off the market.

Pending status and under contract mean the seller has already entered a contract with a buyer, and the intricacies of the contract are on their way to being refined and finalized. This is not an accurate indication that the property will definitely be sold and removed from the market.

Just to add to the cocktail of terminology, either can also be confused or interchanged with the term contingent. Contingency usually refers to a buyer who has agreed to purchase the property, however, the completion of the transaction is contingent on factors such as whether they first sell a property of their own.

So what is the difference between under contract vs pending?

What Does Sale Under Contract Mean?

When a home is listed as “under contract” it means a buyer has made a formal offer to purchase the property, and the seller has accepted the offer.

The two parties enter a contract, which is contingent on financing options and the outcome of the property inspection. We’ve identified this to be in step 5 of the transaction process.

During this stage, both parties move forward with the contract, but certain requirements are yet to be met.

What Does Sale Pending Mean?

Sale pending means that the property is under contract, but there are no longer any contingencies. This stage is further along in the sale process than simply “under contract,” meaning that the sale of the property is more likely to finalize.

Pending is closer to stage 8 of the transaction.

That said, the sale is still yet to be completed and if the final inspection of the property was to fall through, for example, the home could still end up back on the market.

What Does a Contingent Sale Mean?

If a home for sale is listed as “contingent” it doesn’t mean that the home has been sold or that an offer has yet been made.

A contingent contract simply means that the sale of the property is dependent on another factor, for example, the buyer selling their current home first.

Both buyers and sellers can enter a contract with certain contingencies.

Why do Sales Pending or Under Contract Fall Through?

There are many viable reasons for a late-stage property sale to fall through.

If a sale under contract ends back up on the market, it could mean that the buyer couldn’t secure financing for the purchase.

During the due diligence period, a number of issues could arise that affect the buyer’s ability to carry through the transaction. Any enduring land boundary qualms, for example, or non-consented property features – like decks and swimming pools – that were not disclosed by the seller’s agent could affect the buyer’s decision.

If for any reason someone forfeits on the contract (for example, the sale is contingent on the buyer first selling their property, the lender does not approve, or for any due diligence reason) then the seller is then free to accept “back up” offers.

Can I Make a Formal Offer on a Sale Pending or Under Contract?

You can still legally make an offer on the property if you wish because homes that are pending or under contract haven’t technically been sold yet.

However, because a contract legally binds the seller and buyer based on their agreement, a seller cannot accept a secondary offer on the property – even if it’s a better deal.

At the “pending” stage, it’s most likely that the sale of the property will be cleared and may end up being a waste of time to make additional offers on this property.

When a contract falls through due to unforeseen circumstances, the seller is still free to enter a contract with any secondary offer that appeals to them.

Unless a clause in the contract prohibits sellers from accepting secondary offers, listing agents will continue to receive backup offers. In some cases, they will even continue showing the home.

Homes for sale may be listed as “show,” or “no show,” which indicates whether or not the real estate agent can show prospects interested in making backup offers through the property.

FAQ

Can a buyer back out of a sale when the status is ‘under contract’ or ‘pending’?

Yes, a buyer can back out if contingencies in the contract are not met or during the due diligence period, subject to certain conditions and potential financial implications.

How long does the ‘pending’ stage typically last in a real estate transaction?

The duration of the pending stage varies but usually lasts until all contingencies are met and the closing process is completed.

What happens to the earnest money if a sale falls through?

If a sale falls through due to unmet contingencies, the earnest money is typically returned to the buyer. However, if the buyer backs out without a contingency-based reason, they may forfeit the earnest money.

Are ‘under contract’ and ‘pending’ statuses publicly visible on all real estate listings?

These statuses are usually updated on MLS and visible on most real estate platforms, but the timing of updates can vary.

Can a seller accept a higher offer after a home is ‘under contract’ or ‘pending’?

Legally, a seller is bound to the contract with the buyer unless the contract falls through. However, they may accept backup offers in case the current deal does not close.

Summary

Even through the confusion of real estate transaction terminology like pending vs under contract, individual terms usually do have subtle but distinct differences.

It isn’t helpful that listing platforms and even different states use these words interchangeably.

Both terms refer to a stage when the buyer and seller are already bound by contract, but the sale has not been completed yet. Pending is further along in the transaction than under contract.