Can You Buy a House That is Under Contract?

Posted on Apr 6 2022 - 11:38am by Bill Gassett
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By Bill Gassett

With the strength of the real estate market showing no signs of backing off, homebuyers face a challenge. Properties find a buyer quickly after being listed in many markets, leaving potential buyers looking at an under contract or pending listing. But what can you do when your dream home is listed as under contract?

What Does Contingent Mean?
Many buyers will ask what does contingent mean in real estate. It happens with good reason as it is a standard MLS listing status along with pending. Contingent real estate may or may not close are some conditions or contingencies must be met first.

You may still be able to purchase that house you crave so badly. Many homes marked as contingent sales fall through and come back on the market.

What Does Pending Mean?
When a home is listed as pending, the property is under contract with an offer accepted by the seller and the contingencies removed. Even if you might want to offer the seller a higher bid, they will not take it. Sellers are bound by the contract they signed and can't break it.

However, sometimes a home can be listed as pending when it isn’t. If you are interested in a property, it might be worth inquiring further, even with a pending status, just to be sure. Sometimes pending sales fall apart too, although rarer.

Can You Make an Offer on a Pending Home?
Usually, you cannot make an offer on pending real estate. When sellers accept an offer and the buyer goes through their due diligence, they will eventually satisfy all the contingencies they have asked for in the contract.

This might not be what you want to hear if you think you've found your perfect home, only to find it listed as a sale pending. But this works both ways and is something you will be thankful for when you have an offer accepted.

However, it is still possible to submit a backup offer to the seller. The seller will only consider a backup should something go wrong with the current purchase. Since the sale isn't going to be canceled most of the time, you should avoid pinning your hopes on still getting the home.

Do Pending Sales Fall Through Often?
When a property sale is pending, they occasionally fall through, but not very often. Less than 5% of purchases will be canceled for various reasons. These can include:

A Low Appraisal
In hot real estate markets that favor home sellers, it is not uncommon for the real estate appraisal to kill a sale. With bidding wars, many properties are selling well within their fair market value. It is possible that the real estate appraisal could come in low.

When the lender finances your home purchase, they will not lend more money than the home is really worth. If you have offered more money than the appraiser judges the house to be worth, you have an appraisal gap.

If the buyer in this situation cannot find the funds to close the gap or resolve the problem in another way, the seller could be looking for a new buyer.

Failed Financing
Many things can go wrong after preapproval for a loan, causing the buyer to lose the support of their lender. Perhaps they took on a fresh loan or suffered a job loss, a change of circumstance that alters the lender's calculations meaning the previous mortgage preapproval is no longer valid.

Making a bad credit decision could alter the buyer's credit score or change their debt-to-income ratio.

Home Inspection Problems
If serious issues are uncovered during the home inspection, it could cause the buyer to walk away from the purchase. While problems like this can often be resolved with the seller, it isn't always the case. Home inspections are one of the most significant hurdles to clear in buying a home.

Many purchases fall out of escrow because of a home inspection that reveals problems too difficult to solve.

The Buyer Changes Their Mind
Sometimes a buyer can decide that they’ve made the wrong decision, or perhaps something changes in their circumstance that makes the home not as suitable as initially thought. Real Estate agents refer to this as buyer's remorse. Thankfully, it doesn't happen all that often.

Can a Home Listed as Sale Pending Still be Shown to Buyers?
While the home is officially still on the market, it is, in theory, still available for showings. However, it isn't that likely that either the real estate agent or the homeowner will want more showings to take place. The bulk of all pending properties does not have any more showings.

What is the Difference Between Pending and Contingent Listings?
When a property still has contingencies to be fulfilled, the home can be listed as contingent. The contingency could relate to the home inspection, appraisal, financing or the sale of the buyer’s residence.

The seller has accepted an offer, but it has contingencies. Hence why it is called a contingent sale. The contingent sale will become pending when the contingencies have been completed. Therefore, a pending sale is further toward closing than a contingent one.

If a contingency isn’t satisfied, the buyer can walk away with their earnest money returned.

How Long Will a Home Stay Pending?
A home could remain pending for a couple of months or be a few weeks. It will remain at this status for as long as is needed to complete the stages set out in the purchase contract. This will give the buyer time to arrange a home inspection, financing, title checks and deal with any other issues.

The average closing time for most homes is six to eight weeks from when an offer is executed.

Final Thoughts
Is it possible to buy a home under contract - yes! Is it likely that you will be the eventual owner? Probably not. However, when you have found your dream house and were late making an offer, it could be worthwhile to stick it out to see if the sale falls through.

Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 33 years. He has been one of the top RE/MAX REALTORS® in New England for the past decade. Gassett works for RE/MAX Executive Realty in Hopkinton, Massachusetts. In 2018, he was the No. 1 RE/MAX real estate agent in Massachusetts.

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