Heading into the sale pending period on your home sale? Ease your anxiety with these 10 things every seller should know during their house closing. —-
You can put so much effort into prepping your house for sale that you forget what happens after you receive an offer. Putting your John Hancock on a home sale contract might feel like the completion of a major financial deal, but it’s actually just the beginning of the home sale process. Now, you’ve entered the “sale pending” phase.
What does “sale pending” mean?
The sale pending period is one of three listing phases that your home will go through. The first is the active period, when your home is listed as available for sale in your local MLS. The final status is sold, which means that the deal is complete and the home is now the property of new owners.
Sale pending is the status in between active and sold, which indicates that you’ve accepted an offer and are in the process of selling, but that the sale is not yet completed.
In its own way, the sale pending period is just as stressful as the days spent working and waiting for your home to sell. Not only will you need to be packing, cleaning, and getting the house ready for your buyer, there’s also a lot of waiting and hoping that all of the moving pieces fall into place and your home sale closes on time, if you make it to closing at all.
Real estate agents keep an eye on sales pending properties because there are a number of ways that the deal could fall through and the house could come back on the market. Things that could derail a sale during the sale pending period include:
- The home inspection
- The property appraisal
- Contract negotiations between the buyer and the seller
- Contingencies that fail to be met or lifted
- The buyer’s financing with a lender
These are the primary ways a home sale could fall apart, but there are other closing regulations that vary from state to state.
“A lot of the closing process is area specific because there are different regulations in California or Florida, compared to where I am in New York state. Even downstate New York is done differently than upstate New York,” advises Christine Marchesiello, a Move Safe Certified agent located in the Albany, NY area.
Let’s take a look at the top 10 pieces of information that every seller needs to know about the sale pending period that’ll apply in almost every state. For further details, you should talk to your agent about your area’s local market customs and norms.
1. You’re locked into the contract once you sign
Once you’ve reached pending sale status, it becomes difficult for you as the seller to walk away from the deal of your own volition. When you sign the papers and accept your buyer’s earnest money, you are entering into a legally binding contract that obligates you to fulfill your commitment to sell the house.
It doesn’t matter if you get cold feet, start to feel seller’s remorse, or receive a more attractive offer than the one you’ve already signed: it’s going to be really hard to back out of the contract from here. If you do, the buyer could sue you for damages and demand through the courts that you sell through a type of legal action called “specific performance” — which is basically a way to force you to sell as promised.
However, one way to protect yourself in a contract for a smoother “sale pending” phase is to work with your agent to pencil in a kick-out clause. A kick-out clause gives you the right to continue showing the home during the contingency period. If you receive another offer, your original buyer will have a certain period of time (usually 24, 48, or 72 hours) to remove the contingency holding up escrow. This is particularly helpful when the buyer’s offer is contingent on the sale of their existing home.
2. The buyers can walk away more easily than you can
While you’re locked in to the home sale as soon as (or soon after) you sign the contract, your buyer is not. Most buyers will add a number of contingencies to the contract, such as the home inspection, appraisal, and financing contingency. Their purchase is contingent on all of these steps in escrow going according to plan. However, a number of hiccups can prevent those contingencies from being lifted, including:
- Irresolvable issues that arise during due diligence
- An appraised value that comes in under the contract price
- Buyer encounters financial trouble and their financing falls through
- Repair request negotiations break down
- Title work reveals unresolved issues
If a buyer encounters any of these roadblocks any they are protected by contract contingency, they can cancel the contract and keep their earnest money. To keep these escape hatches to a minimum, work with a top real estate agent who can advise you on how to remove certain contingencies before signing the contract. A great agent will also help you hold buyers accountable to their contract deadlines to keep escrow on track.
3. Line up backup offers to hedge your risk
When high demand and a low number of houses for sale result in a strong seller’s market, buyers are willing to agree to almost anything for a chance to get into a house. This creates the perfect opportunity for sellers to line up a backup offer from another buyer that only comes into effect if the original pending sale falls through.
“If sellers are able to secure a backup offer, it gives them a little bit more power in any inspection negotiations that might arise,” advises Marchesiello.
“If their buyer is unreasonable with the inspection repair requests, the sellers can stand their ground more firmly during that inspection negotiation period, knowing that they have another offer already in their back pocket.”
Just make sure that backup offer is one you’re willing to accept — because that backup is a legally binding contract, too. If you arrange a so-so backup offer simply to use it as leverage and your current pending sale does fall through, you could be stuck.
4. You’re not entitled to see the full inspection report
Once assured that all parties are all in, the first step buyers take is hiring a home inspector to find any issues that may exist. The inspection report is usually done right off the bat after you sign the sales contract.
Just don’t expect to get your hands on the full report after the home inspection is completed.
“One thing sellers misunderstand is that they’re not entitled to see it. It’s the buyer’s inspection report,” explains Marchesiello. “However, if the buyer uses the report to ask for a major repair or credit, they are required to submit the relevant pages of the inspection report. But they still don’t have to give you the entire inspection report.”
In addition, demanding a copy of the report can actually backfire as the buyer can use it to say your home is defective.
5. Come ready to negotiate after the buyer gets their inspection report
If the home inspection finds a surprise repair item and your buyer wants a full credit for that amount, you do not have to agree. You can make a counteroffer to your current buyer’s request and negotiate a compromise.
“During closing, sellers rely on their buyers to operate in a way that is a win-win for everybody. That’s what happens 60% of the time, but often in negotiations, one party wants to feel like they’re winning everything and not compromising,” says Marchesiello.
“There’s always a really fine line when negotiating, because buyers tend to ask for the most extreme amount and sellers obviously want to give the least amount of credit. So be prepared to get counter estimates for any of the buyer’s repair requests.”
For example, if the inspector finds a crack in the foundation, and the buyer gets a $12,000 repair estimate from a mason, you don’t need to negotiate based off of that number. The buyers could shop for the highest estimate they can find to put themselves in a better bargaining position.
You need to get an estimate from your own contractor or mason and get an estimate as well. Your contractor may determine that it’s not a structural crack, but a cosmetic one that wouldn’t necessarily need to be repaired at all.
There are no rules regulating these negotiations, though. It’s the discretion of the buyer and seller to come to an agreement over the repair requests.
If you cannot negotiate a compromise, you can say no to the request and let the current buyer walk away. Then it’s up to you if you just want to try your luck with the next buyer, or you can pull the house off the market and relist after making the repair.
6. …But know that you aren’t always required to negotiate
Brand new landscaping, resurfacing the pool, a carpet credit because they don’t like the current color — buyers come up with all sorts of crazy requests during the negotiation period.
However, while you are legally obligated to sell them the house at the completion of the sale pending period, you are not required to transform it into their dream home by fulfilling their every request.
For the requests that are purely cosmetic or just personal preference, you can simply say no without any negotiation. Depending on your state, you may even be able to say no to some legitimate repair requests. Every state has their own standard in terms of what qualifies as a repair that would require negotiation after the inspection report comes in.
“In New York state, a seller is only required to renegotiate the contract terms if the inspection finds one major structural defect with a repair cost totaling at least $1,500. However, in other parts of the country, pretty much anything can be asked for or renegotiated,” explains Marchesiello.
Knowing that a flat “no” is an option, it’s tempting for some sellers to take a hardline against any and all buyer repair requests, but not so fast. There are some repair requests that buyers are likely to take a stand on and could be required to make the house safe and livable, including:
- Water damage
- Structural issues
- Old or damaged roofing
- Damaged or old electrical system
- Plumbing problems
- Insect and pest infestation
- Issues with the HVAC system
7. Know your options if your buyer’s appraisal comes in low
The other major sticking point that can cause your pending sale to fall through is the home appraisal required by lenders to verify the market value of the home. When a low appraisal comes in, you have four main options:
- Drop the price to meet the appraisal amount.
- Require your buyer to find the cash to make up the difference.
- Meet somewhere in the middle (you drop your price a bit, the buyer brings some cash to the table).
- Ask your buyer to request a second appraisal (FYI, their lender may not agree).
Ask your agent to advise you on which option is the best in your specific situation. They’ve got the insider knowledge to know if the appraisal is on point or incorrect.
“Good seller’s agents have their finger on the pulse of the market in a very different way than appraisers do. So if an appraisal comes back low, a good real estate agent can submit new comparables for the lender’s consideration, or even try to get a second appraisal,” advises Marchesiello.
8. Don’t panic if communications get quiet for a stretch
Once you’ve gotten through your inspection contingency and the buyers have their mortgage commitment in place, you probably won’t hear a lot on how the sale process is progressing, but it IS progressing.
“It’s going to get quiet because there’s a lot of background things happening,” explains Marchesiello. “There’s title work, which takes anywhere from two to five weeks. The bank is also collecting final documents because even though there is a mortgage commitment, it’s often contingent on review of final documents from the buyer. So it can feel like nothing’s happening, but during that time, no news is good news.”
The title work period is the quietest one because there’s simply nothing to communicate when the attorneys are waiting on the title report to come back. Once it does come in, it must be reviewed to make sure the title is clean and ready to be transferred.
This can take longer than you’d expect because most attorneys will not even order the title work until after all other contingencies have been removed. They don’t want to pay for a title search on a property if the buyer doesn’t have their mortgage commitment completed yet.
9. Use that quiet time to get your home ready for the final walkthrough
Communications may be calm and quiet for a stretch, but you can use the downtime to clean up your house for the approaching final walkthrough.
Things start moving fast once the title is cleared for transfer. That’s pretty much the last step before the sale closes, so once the title has cleared, your buyer will want to schedule a final walkthrough to ensure the house is as it should be before the sale closes.
If your buyer has a great agent, they’ll advise them to wait until you’ve completely moved out of the house before scheduling the final walkthrough. This is the only way they can make sure that you haven’t taken anything you’ve promised to leave, like that dining room chandelier or the kitchen appliances.
They’ll also want to ensure that you’ve left the house in broom clean condition so that it’s move-in ready, not cluttered with junk you’ve left behind.
Prepare yourself for the uncertainty of the sale pending period
Accepting an offer can feel like the exciting conclusion of your home sale adventure, but it’s only the beginning of the sales process. The sale pending period that follows is filled with ups and downs that can threaten the completion of your sale, which can leave you feeling anxious and uncertain. But if you enter the sales pending period armed with the knowledge of what’s going on, and how to respond to any issues that arise, you’ll be equipped to see your sale through to a successful closing day.
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