If you’re shopping a Lake Minnetonka homes for sale listing, you’ve no doubt seen the designation “pending” or “contingent” next to the listing online, attached to a yard sign, or in the newspaper. If you’re like many prospective home buyers, you may not fully understand exactly what those terms mean. Some buyers mistakenly assume that a “pending” message means the home is no longer on the market. However, as we’ll discuss here, that’s not always the situation. Should you come across a home you like and see it listed as “pending,” don't automatically give up. Let’s look at what the terms “pending” and “contingent” mean in today’s real estate market.
What does “subject to” and “contingent upon” really mean? Before discussing what a “sale pending” means, let’s talk about how a normal real estate sales transaction really works. Typically speaking, a prospective home buyer makes an offer to purchase a home “subject to” a real estate appraisal, a property inspection report, or a final mortgage loan approval. In addition, many times a buyer may make the purchase of the home “contingent upon” the sale of their existing home – meaning they intend to buy the new home, but only if their current home sells. Naturally, that’s where most people will obtain the necessary funds for the down payment and closing costs for their new purchase. In the event the home doesn’t appraise for at least the sales price, if there’s an issue revealed in the home inspection report, if the purchaser can’t obtain financing, or if they can’t sell their current home, the buyer can usually get out of the contract. Each of those items allow the buyer the opportunity to exit the contractual agreement as a contingency.
A home under contract may still be available. Depending on the market in which you’re shopping, real estate agents often characterize a home with a contingency as being “active with conditions” or “active continue to show.” What this really means to other prospective buyers and agents is the property is still potentially available and the sellers are open to other offers to purchase. So, if you come across a Lake Minnetonka homes for sale listing, remember that while the seller isn’t able to enter into a contract with another purchaser, the sale is far from completed. In such a circumstance, there may be an opportunity for a “back-up” offer – meaning if the original deal doesn't close, the seller will have an additional offer to fall back on. In the absence of a back-up offer, the property would have to go back on the market and essentially return to where it began in the sales process.
In some real estate markets in certain states, prospective buyers don't execute a contract until they’ve thoroughly inspected the property. Basically, there’s a verbal agreement between the buyer and the seller to purchase the property – and the home isn’t “sold” until the contract is executed (or closed) by all parties involved.
“Sale pending” means there are no more contingencies. A property marketed as a Lake Minnetonka homes for sale listing is truly pending if all contingencies have been satisfied. In that case, the prospective purchaser is “locked into” buying the property. The only step remaining is for the closing of the sale to take place – a process that can range in time from a few days (in the case of a cash sale) or up to several weeks if there is mortgage financing involved.
To avoid confusion, most real estate agents won’t characterize a home as “pending” until the sale is fairly close to being consummated – meaning the sale of the property is pending the final closing. The buyer can still exit the contract, but it’s highly unlikely by that time such an event will occur. However, if the buyer needs to walk away from the deal, in most cases he will forfeit the earnest money deposit paid when the contract was executed.
Determine the status of the property in question. To remove all doubt about where the home you're interested in stands, ask questions of the real estate agent or of the seller. Did the buyer have the proper inspections performed? Did everything check out satisfactorily? Ask your real estate professional to talk to the listing agent to find out the home's current status. You can then fully understand if there’s an opportunity to move forward.
As mentioned, don't be discouraged if the home you’re interested in is labeled “sale pending.” Just keep the home in the back of your mind and actively follow the progress of the sale. Many times in busy markets, buyers may find something they like better or a mortgage lender may change policies creating problems in closing the sale. A good, experienced agent will work closely with the listing agent so if a sale doesn’t come to fruition, a new buyer – their client – can step in and become the new purchaser. If not, just continue your search for another Lake Minnetonka homes for sale listing.
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