In the intricate world of real estate transactions, the terms “under contract” and “pending” are frequently used to depict the status of a home sale. While both signify that a buyer and seller have agreed upon the sale terms, subtle distinctions exist between them.
Nonetheless, the disappointment of seeing a home sale crumble before reaching the closing stage is an all-too-common occurrence. We will explain the disparities between “under contract” and “pending” in the context of real estate and expound upon prevalent factors that lead to the collapse of home sales.
From experience as a REALTOR®, many buyers and sellers don’t understand the terminology we use to describe listing statuses.
Pending vs. under contract
Before diving into the reasons behind the unraveling of home sales, it is imperative to grasp the difference between under contract and pending within real estate.
- Under contract: A property labeled as “under contract” indicates that a buyer and seller have reached an agreement regarding the terms of the sale, encompassing price, contingencies, and the closing date. However, the transaction is not finalized, as certain contingencies might need to be met before the deal can proceed. Buyers can potentially still purchase a contingent home.
- Pending: Conversely, when a property is designated as “pending,” it signifies that the sale has progressed further along the spectrum. In this scenario, all contingencies have been satisfied, and the transaction is poised for its final closure. A pending status implies the deal is on the cusp of completion, with only administrative formalities remaining. See contingent vs. pending.
Common catalysts for unraveling home sales
Now that we have differentiated between “under contract” and “pending,” let us delve into the prevalent factors that can precipitate home sales collapse at various junctures of the process.
- Emotional attachments: Sometimes, buyers or sellers develop a strong emotional attachment to a property, which can cloud their judgment. A change of heart or reluctance to part with a cherished home can lead to the dissolution of the contract.
- Contingency hurdles: Contingencies, such as selling the buyer’s existing home or securing a mortgage, are essential to a real estate contract. Failure to fulfill these contingencies can trigger a contract’s demise.
- Legal and regulatory challenges: Legal issues, zoning conflicts, or regulatory hurdles can surface during the due diligence period. These complexities may be impossible, causing one or both parties to opt out of the deal.
- Environmental concerns: Environmental issues like contamination or hazardous materials discovered on the property during inspections can be a deal-breaker. Buyers may withdraw their offers if such concerns arise.
- Unexpected life events: Life is unpredictable, and unforeseen circumstances, such as a job loss, divorce, or health crises, can disrupt a buyer’s or seller’s ability to move forward with a transaction.
- Contractual disagreements: Disagreements over contractual terms, repair requests, or seller concessions can strain negotiations to the breaking point, leading to a contract’s dissolution.
- Market fluctuations: Rapid fluctuations in the real estate market can alter the dynamics of a deal. If a property’s value suddenly plummets or spikes, a buyer or seller may reconsider their commitment to the transaction.
- Inadequate communication: Effective communication between parties is paramount. Misunderstandings, lack of transparency, or poor communication can lead to mistrust and ultimately result in a failed sale.
Deciphering the causes behind home sales fall apart
Now that we’ve laid the groundwork by understanding the differences between “under contract” and “pending,” let’s delve into why home sales can falter at different stages.
- Lender woes: Beyond financing issues, lenders can also contribute to unraveling a home sale. Sometimes, the lender may encounter internal problems, bureaucratic delays, or stricter lending requirements that prevent the buyer from securing the loan, even if their financial situation remains stable.
- Unforeseen costs: As the transaction progresses, unexpected costs such as hidden structural defects or environmental hazards like asbestos or lead paint can emerge. The financial burden of addressing these issues can lead to disagreements between the parties, causing the deal to crumble.
- Property line predicaments: Property boundaries and easements can become sources of contention. Disputes over property lines or disagreements with neighbors over land use rights can create insurmountable obstacles in the sale process.
- Insurance hurdles: Obtaining insurance for the property can sometimes pose challenges. It can jeopardize the sale if the buyer encounters difficulties securing homeowners’ insurance due to factors like the property’s condition or location in a high-risk area.
- Change in circumstances: Life can be unpredictable, and sometimes, unforeseen personal circumstances may force either the buyer or the seller to withdraw from the transaction. These circumstances might include job relocations, family emergencies, or sudden changes in financial stability. It is one of the common reasons pending sales fall through.
- Environmental issues: Environmental concerns, such as zoning changes, rezoning proposals, or neighborhood developments, can impact the desirability of a property. Buyers may back out if they discover that undesirable changes will soon surround their dream home.
- Contractual disputes: Disagreements over the terms of the contract itself can be a significant reason for a sale to fall apart. This may include disputes over repair requests, contingencies, or timelines that neither party can resolve satisfactorily.
- Inspection controversies: While home inspections are typically straightforward, differences in interpretation can arise. The buyer’s inspector may identify issues the seller disputes as minor or non-existent, leading to disagreements that can derail the transaction.
- Failure to meet deadlines: Real estate contracts have specific deadlines for various milestones, such as completing inspections or securing financing. If either party fails to meet these deadlines, it can trigger contract termination.
- Third-party interference: External factors, such as a government agency delaying necessary permits or a homeowners’ association restricting specific property uses, can impede the progress of the sale.
Final thoughts
Discerning the disparities between “under contract” and “pending” in real estate is pivotal for all involved parties. Home sales can crumble due to various factors, including emotional attachments, contingency hurdles, legal and regulatory challenges, unexpected life events, contractual disagreements, and inadequate communication.
Homes active under contract can still be purchased, so buyers should be ready if they love a particular home.
To mitigate the risk of a contract’s collapse, open and transparent communication, meticulous due diligence, and adaptability in addressing potential challenges should be integral to the real estate transaction process.
