Quite often, we as realtors can get a bit caught up with our “realtor lingo” and assume everyone knows what we mean when we use certain terms. One of these terms, in which I will talk about briefly today, is used quite frequently in the industry; “pending”.
In its simplest form, pending means a house is sold but still has conditions. The seller has agreed to the terms of the offer presented by the buyer, however there are still certain conditions that must be met, before the contract becomes legally binding. Therefore, a house is never “sold” until all conditions have been removed.
A condition is any clause that the buyer has included that requires further investigation. The three most common conditions are:
1) Property inspection – The buyer (at their own expense) hires a property inspector to come do a complete review of the condition of the home. They can be fairly expensive ($400-$500) and take 3 to 4 hours of your time, but I ALWAYS recommend my clients do this. Not only are you provided with a written comprehensive review of the entire property, but you are also provided timelines for future maintenance issues and can allow you to set up a budget for future repairs.
2) Financing approval – Quite often nowadays I suggest to my clients to go to a mortgage broker before looking at a properties so they know what their house spending limits are (pre-approval). Pre-approval however does not guarantee you will be aprroved for a particular home though, so after the intial purchase contract is agreed to, it is important to send it to your broker to get the final ok before removing this condition.
3) Review of condo documents (for condos) – This only applies for condo buildings – it gives an extensive overview of the reserve fund study (like a property inspection for a condo), the reserve fund (how much money they have in the budget), the meeting minutes (the ongoing day to day issues and expenses of the condo) and of course, the bylaws ( the rules of the building). If any of these documents are not satisfactory to the buyer, they can choose not to remove this condition at this point.
Although these are the most common, any condition can be included in a contract, and it is up to the seller to decide if they wish to allow them. Some examples of others I have seen – condition to the approval the buyers father, condition to certain work being completed at the property first, or condition of the sale of the buyers own home first. There are no limits as to what conditions are included, however it is mandatory that the buyer take every necessary step to ensure the condition can be removed before agreeing not to. (example – if it is condition to financing, the buyer can not not waive this condition saying they cant get financing if they have made no attempt to seek financing. In this case, the buyer could be forced to uphold the contract.)
If conditions are included, a date must be set for condition removal. For example, if the contract gets accepted on the 1st of the month, the buyer might set the 8th of the month as condition removal date. This condition removal date can be whenever, but most typically its about one week later (However, the shorter the time for conditional removal the more appealling the offer). At the date of condition removal, 1 of 2 forms must be signed and submitted: a waiver of condition removal or a non-waiver of condition removal. A waiver of removal signed by the purchaser means that this deal is legally completed and submitted to the lawyers – now it is technically “sold”. Non-removal however nullifies the contract and the purchaser is no longer bound to the contract. There is also an option, should for example the buyer need more time to fulfill the conditions, to complete an amendment – which basically allows for a change of condition removal date, but everything else in the contract remains the same.
Hope this helps, and in the future I plan to have more “realtor lingo” posts to keep you up to date and informed with whats happening in the real estate world.
