I often get calls from people thinking of buying a Los Angeles home, who inquire about a property already in “Pending” status.
What does “Pending” mean?
In our MLS (Multiple Listing Service) we have four main statuses – Active (A), Looking for Backup (B), Pending (P), and Sold (S). There are a few more, Hold, Withdrawn and Canceled, but they are not relevant for this conversation.
Buyers want to know if they can make a backup offer on a property in Pending status, so I will explain, how this works when handled correctly.
When an offer first gets accepted by the seller, the listing agent will put the property into Backup status. This generally means that they will still accept backup offers, should the current buyer not perform. This can happen for many reason, the main ones being that they conduct an inspection and find problems they don’t want to deal with. Or they ask the seller to help with repairs, either by doing them or paying for them. If the buyer is not satisfied they will back out. Another reasonsis that the house does not appraise at the amount offered. In this case, the buyer can pay the difference, ask the seller to lower the price, or they can back out. And, there is the occasion where the buyer is unable to get a loan.
Until the above contingencies are removed, the longest of which is usually around 17 days, but given the state of the lending industry today, it can be a little longer, the backup offer is still in play. Once the contingencies are removed, the status of the property will move into Pending. This is usually an indication that the property is going to sell to the current buyer. It is not a 100% guarantee, but not closing would be the exception to the rule.
If you really love a property, then it would not hurt to put in a backup offer. This offer will go through the same process as the original offer. It will need to be approved by the Seller. There can be more than one backup offer but they are put into position – first backup, second backup, etc. If the original buyer backs out then the first backup offer has a chance to buy. They are not bound to perform, but they are given the chance. And if the first backup buyer has moved on, then the second one is approached and so on.
This is all good if the listing agent handles the statuses correctly. Some will put the property straight into pending which can lessen the chance of getting a backup buyer. That might also be because they have an all cash buyer so they are pretty certain the purchase will go through. Certainly if you see a Pending listing that only just went into escrow it is worth asking your agent to see if you can submit a backup offer. However, if you see a listing that has been off the market for at least 2-3 weeks in that status, it might be a little late.
If you are buying a Los Angeles home, don’t dwell on the one that got away, let’s see if you can find you another one where you will be the buyer and others will be looking to make a backup offer.
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