This is a common question for home buyers in today’s competitive housing market. With bidding wars and homes selling quickly, you may find the perfect home only to discover it already has an offer. Should you still see the home or move on? Here is what you need to know about looking at pending homes.
What does pending mean?
A pending listing means the seller has accepted an offer from a buyer, but the sale hasn’t closed yet. Typically there is a period between when the seller accepts the offer and the close of escrow, which is when the sale is finalized. This pending period gives the buyer time to complete inspections, finalize financing, and take care of other closing tasks.
So when you see a home is pending, it means it is essentially off the market but the current buyers could still back out during the pending period for various reasons. Some common reasons offers fall through include:
- The buyer’s loan falls through
- The inspection turns up significant issues
- The appraisal comes back lower than expected
- The buyer gets cold feet and changes their mind
While there is no guarantee, pending deals do sometimes end up falling apart. This opens the door for a backup offer from another buyer.
Should you see a pending home?
If you really love a home that is pending, it can be worth asking your real estate agent to show it to you. Here are some pros and cons of viewing and putting in an offer on a pending property:
Pros
- You get to see if the home meets your needs and expectations
- If you want to make an offer, you are ready to move fast
- The existing deal may fall through, giving you an opportunity
Cons
- The sellers are likely focused on their existing buyers
- You run the risk of wasting time on a home you can’t actually get
- There may be pressure to waive contingencies to make your offer appealing
At the end of the day, it comes down to how much you love the property. If it seems like your perfect home, it may be worth pursuing just in case. But if you are lukewarm, you might be better off waiting for the next great listing.
Can you make an offer on a pending home?
In most cases, you can still submit an offer on a pending home, but your offer will be a backup offer. This means the sellers won’t look at or accept your offer unless their current deal falls through.
To make your backup offer attractive, it needs to be competitive with the current accepted offer. Work with your agent to find out details like:
- The accepted offer amount
- The closing date
- Any special contingencies waived
In many cases, you may need to waive contingencies like the financing, appraisal, or inspection contingency to be considered. You also want your earnest money deposit to match or exceed the accepted offer.
While there is a chance the sellers could renege on the existing deal and go with you, they may also reject your backup offer outright. It’s a gamble, so only pursue it if you feel strongly about the home.
Should you waive contingencies?
When putting in a backup offer, you will need to be competitive. But is it smart to waive contingencies? Let’s look at the pros and cons:
Pros of waiving contingencies
- Makes your offer more appealing to sellers
- Shows you are serious and willing to move quickly
- Could give you an edge over other buyers
Cons of waiving contingencies
- Gives you less opportunity to back out if issues arise
- Creates risk if inspection finds undiscovered problems
- Forfeits your deposit if financing falls through
Experts recommend being cautious about waiving contingencies. Don’t waive anything you aren’t comfortable with. For example, only waive the financing contingency if you are positive you can secure a loan.
Tips for pursuing a pending home
If you decide to go for a pending property, here are some tips to boost your chances:
- Act quickly – Move fast so your offer is ready if the first deal falls apart.
- Keep close contact with your agent – Lean on your agent to monitor the situation and communicate with the listing agent.
- Be prepared to negotiate – Assume you’ll need to negotiate if you get the chance to purchase.
- Have your pre-approval ready – Get pre-approved so you can move immediately if needed.
- Know your budget and terms – Decide what you can afford and the offer terms you are willing to meet.
- Don’t get emotional – Approach pursuing a pending home logically rather than emotionally.
Staying level-headed and being prepared to act quickly are key to having success with a pending property.
How often does a backup offer turn into a sale?
It’s hard to know exactly how often backup offers turn into sales, since real estate statistics don’t track this specifically. However, we can look at some related data:
- According to Redfin, around 37% of offers faced a bidding war in January 2022. This suggests many listings receive multiple offers.
- Zillow data shows 24.5% of sellers accepted an offer within 1 week of listing their home in 2021. When homes go fast, backup offers may be common.
- NAR indicates 87% of home listings on average sold in under a month as of October 2021. The quick turnaround leaves a small window for backup offers.
While statistics aren’t available, some real estate agents report 5-10% of their sales stem from accepted backup offers. But in a hot market where homes get multiple offers, the chances could be higher. It’s safest to assume your backup offer has less than 50/50 odds.
What happens if a backup offer is accepted?
If you’re in backup offer position and get the good news that the sellers are accepting your offer, here is the general process:
- The listing agent will contact your agent to inform them your offer is now the primary accepted offer.
- You now take over the pending process, allowing the first buyers to withdraw.
- You will need to quickly sign updated contract paperwork with the new terms.
- Your contingencies will kick in (unless waived initially).
- Work through your inspection, appraisal, financing etc. per the contract.
- Head to closing once all tasks are complete!
Make sure you are ready to move forward decisively if your backup offer is accepted. The last thing you want is to get the home under contract then be unprepared and risk the deal falling through.
Should you buy a home that was previously pending?
If the sellers re-list a home that was previously pending, is it a good idea to buy it? Here are some pros and cons to weigh:
Pros
- The home may be priced more attractively after falling out of contract.
- You can likely take more time on standard contingencies since you are the primary offer.
- The sellers are motivated to sell after the previous deal failed.
Cons
- A failed deal could be a red flag something is wrong with the home.
- The sellers may be difficult to negotiate with if already frustrated.
- There is likely a reason the first buyers pulled out of the deal.
If you want the home, it’s okay to move forward but be sure to do your due diligence. Hire a thorough inspector, deeply research the property, and verify your sources. Buying a previously pending home can work out, but approach with caution.
How to write a backup offer
A backup offer needs to be compelling and ready to go. Here are 5 tips for writing one:
- Include a cover letter – Briefly share your interest and story in a personal note.
- Match key terms – Mirror important terms like price and closing date.
- Adjust as needed – Consider tweaking terms around contingencies or earnest money if needed.
- Highlight strengths – Emphasize financial readiness, flexibility, etc.
- Use an escalation clause – Automatically increase your offer if needed to beat other backup offers.
The following table compares a sample primary offer with a competitive backup offer:
| Term | Primary Offer | Backup Offer |
|---|---|---|
| Purchase price | $500,000 | $500,000 |
| Down payment | 20% down | 25% down |
| Close date | 45 days | 30 days |
| Contingencies | Inspection contingency | Inspection waived |
| Earnest money | $5,000 | $10,000 |
Making your backup offer as competitive as possible gives you the best shot if the sellers decide to go a different direction.
When should you walk away from a pending home?
Chasing a pending home can be time-consuming with uncertain odds. As a buyer, you need to know when to call it quits. Consider moving on if:
- The deal seems totally solid between the seller and main buyer.
- You already waived contingencies but are still not competitive.
- The home has been pending for several weeks with no change.
- You find out any concerning hidden issues with the property.
- You cannot comfortably meet the main offer’s price or terms.
- Your agent advises walking away.
Don’t waste too much time or compromise too far outside your budget/risk comfort zone. Be willing to walk away when the situation calls for it.
Conclusion
Purchasing a pending home can happen, but requires the right property, preparation, and patience as a buyer. If you decide to pursue a pending listing, lean on your agent for guidance and be ready to act quickly if the current deal falls through. But also know when to walk away and wait for a cleaner sale.
While pending deals can be alluring, they are inherently risky with unpredictable outcomes in competitive markets. Keep your eyes open for new listings even as you pursue your first-choice home. With a balanced approach, persistence, and compromising only on your own terms, you can turn chasing a pending home into a satisfying win.