A listing going from Pending to Active can be frustrating for the seller (and the unsuccessful buyer), but it can be an exciting new opportunity for buyers that were not originally able to get the property under contract. The initial contract didn’t close, and now there’s a chance for someone else to buy the property. For sellers, it could mean reconsidering “backup offers”, as well as new buyers that may not have even been in the market for a home when the original contract was signed.
Understanding what pending to active means and what steps you should take when a listing changes status is vital to ensure everyone involved has a successful outcome. In this blog post, we will look at what pending to active means and provide some helpful information on steps to take when faced with such a situation.
What does it mean when a listing goes from pending to active
When a listing goes from Pending to Active status, it typically indicates the original agreement or contract failed to close and the property is now available again for potential buyers to consider.
Reasons why a property goes from Pending to Active
There are many possible reasons or causes for a property going from Pending to Active.
The buyer was unable to obtain financing
When a property listing status changes from “Pending” to “Active,” it could mean that the buyer was unable to secure financing to buy the house. There are many reasons why a bank could reject the application for a loan to purchase a home. Underwriting may not like what they see when they do their due diligence on the buyers’ assets, income, obligations, etc. Negative changes could occur with regard to the buyer’s credit score. The buyer could have a negative financial event occur that affects their ability to qualify for a loan. The list goes on and on.
If the original buyer’s contract was contingent upon obtaining financing to purchase the home, that buyer may be entitled to the return of their deposit if they fail to be approved to purchase the home.
Whatever the reason, if the buyer can’t get financing to purchase the home, and if they don’t have enough cash to purchase the home…the seller will have to consider taking the property off the market, or trying to sell it to a new buyer.
Unable to fulfill a contractual obligation of the sale
Contractual obligations in real estate transactions refer to the buyer and seller’s legal responsibilities that they must meet to complete a deal. These conditions are usually outlined in what is known as the purchase agreement. Common contractual obligations involve inspections, financing, title insurance, and other contingencies.
The seller is no longer willing to sell the property at the agreed-upon price.
When it comes to a seller who is no longer willing to sell their property at the agreed-upon price, there can be several reasons. For instance, they may have changed their heart and decided to keep the property or are waiting for a better offer. They may also feel that the buyer’s offer was too low or that the buyer is longer interested.
A seller’s right to simply cancel the contract of a qualified buyer (in an attempt to relist and sell for money) will oftentimes be limited by the original contract. Sellers are usually locked in to selling the home at the agreed-upon price as long as the buyer meets all contractual deadlines and they are ready to close on time.
The buyer is no longer interested in purchasing that property
Buyer’s remorse could be another reason why a property goes from Pending to Active. Buyer’s remorse happens when someone buys something and then regrets their decision afterward.
Buyers are usually required to use their good faith best efforts to qualify for financing and to purchase a home once a contract is signed. If a buyer acts in bad faith and they do not use their best efforts to purchase a home, they could risk losing an escrow deposit.
The buyer’s contingencies (i.e. conditions under which a buyer could be allowed to walk away from the deal and retain their deposits) are usually clearly established in the contract. Due diligence/Inspection and Mortgage Contingencies are the most common contingencies. The short of it is that buyers usually can’t just say “I changed my mind” and walk away with their deposits. To walk away clean, buyers must invoke specific contingencies that would be articulated in the contract to purchase the home.
Appraisals can prevent a deal from closing
Appraisal issues can wreck a deal. If an appraisal “comes up short” of the agreed upon sales price, this may require the buyer and seller to renegotiate. The seller may need to come down on their asking price. The buyer may need to bring additional cash to settlement. If approved, a bank will lend the buyer a certain percentage of the appraised value of the home. If everything goes according to plan, the appraised value will be at or above the negotiated sales price. If it doesn’t that’s when things get can get messy and deals can blow up.
Appraisals may reveal defects or issues with the property, such as problems with plumbing, electrical systems, roofing, etc., which can impact what is considered a reasonable price. In addition, appraisers may determine that the market value is simply lower than the negotiated sales price.
If a buyer and seller agree to the sale of a home for $110,000, and the buyer qualifies for 90% financing, then the parties are assuming that the bank will provide $99,000 in financing, and the buyer will have to bring 10%, or $11,000 to settlement (plus closing costs). However, if the appraisal comes in at $100,000 (instead of $110,000), then the bank will only lend 90% of $100,000 (i.e. $90,000). With the bank only willing to provide $90,000 of the $110,000 sales price, the buyer may not have another $9,000 to bring to settlement. And unless the seller is willing to shave $10,000 off the sales price, the deal may fail.
What steps to take when a listing goes from Pending to Active
Knowing what steps to take when a listing goes from Pending to Active can also save time and money when it comes to navigating the real estate market. With this in mind, here are some essential steps to take when a listing goes from pending to active:
1. Typing up loose ends
It is crucial for both the buyer and seller to be aware of what has happened and what steps to take next. The original deal has fallen through, but there may still be some business to take care of, including the possible return (or dispute over) escrow deposits.
2. Inform Your Client
Explain to your client the reason(s) why the deal fell through and what is coming next. Sellers should be prepared to put the property back on the market. The buyer will hopefully start preparations for securing a different property. Ensure that you know all current and potential complications when helping your customers plan.
3. Review the purchase agreement
It is essential to review the purchase agreement to determine which contractual obligations or conditions of the sale still need to be met. It will help identify what needs to be addressed before either party can make or accept a new offer.
4. Negotiate a new price
One potential solution to the Pending to Active problem is negotiating a new price between the buyer and seller. It is usually done through an informal discussion or formal negotiation process. Both parties must enter negotiations with an open mind and willingness to compromise to reach a mutually beneficial outcome.
Strategies to market the property effectively
Once the Pending to Active process is complete, it is essential for the listing agent to market the property effectively to attract new buyers. Online promotion, social media promotion, open houses, contacting agents that previously had shown the home or had clients interested in the property, and more may be in order for the listing agent to do an adequate job of promoting the listing. The listing agent will also need to be ready to answer questions about what happened to make the original deal fall apart.
How to negotiate with potential buyers successfully
Dealing with potential buyers can be complicated, especially when multiple offers are on the table. Encourage your seller to remain calm and level-headed during this stage, as emotions can often cloud judgment.
By keeping an open line of communication with your client and understanding what both buyer and seller want from the transaction, it is possible to reach an agreement that works for both parties.
Conclusion
With the right steps, you can ensure your real estate transaction is as successful as possible. It is also essential to understand what causes a listing to go from pending to active and what steps must be taken when facing such a situation.
Preparing and knowing your course of action before any sale goes terrible can save you time and money when looking into the real estate market. Educating yourself on what steps to take in this situation is the key, so you save valuable resources.
It includes communicating with buyers and sellers, marketing the property effectively, preparing all necessary documents before closing a sale, negotiating successfully, and documenting any changes made during negotiations after the deal is complete. By following the tips outlined in this article, you can ensure that your real estate transaction will go as smoothly as possible while protecting yourself legally.
Last modified: January 23, 2023
