What is a PEnding Contract?

A pending contract occurs when an offer presented by the buyer's agent to the listing agent is accepted. Once that offer has all parties’ signatures then you have an "executed" or “pending” contract. The deal could still potentially not make it to closing for various reasons including the buyer failing to obtain financing, an unexpected negative inspection report, or an under-valued property appraisal.

A pending contract is a legal binding document, each portion of the contract is going to impact your client's time, money, and peace of mind. Be sure to communicate with your client what each section means, what their options are, and how the final result will impact their bottom line at closing day. Read here if you would like a refresher on how to write a purchase contract from our previous blog on the Career Corner.

If either party counters or changes any part of the initial offer, you will need to communicate that change to your clients and explain how this impacts their side of the transaction. If your client agrees to these changes, then both parties must initial next to the amended text in the contract to prove that both parties acknowledge and accept these alterations to the original contract.

What happens after you get your client under contract? Below is a detailed transaction timeline for new real estate agents to review. Use this template to make sure you that you do not miss a deadline and share with your clients so that they are informed on how their real estate transaction transpires. Add in your client's specific dates when you present this to them so that they can be prepared for each step. Missing a deadline could push out closing or worse, cost your client their earnest money for not staying within the contracts agreed parameters. It is your job, as your client's representation, to guard their best interests and keep everything on track according to the executed contract. The better the communication, the smoother things go.

Your first step as the real estate agent in this transaction is to make sure that the executed contract has all signatures needed and there are no misunderstandings or blanks where there shouldn't be.

Then, use the contract to map out the deadlines for these action items:

Contract Acceptance date. When all signatures are completed on contract.
Pre-preapproval Letter Submission Date. This letter should be issued to your client well before you write an offer. Your client's pre-approval letter should be submitted to the listing agent with their purchase contract, or at the very latest within 3 days of obtaining an executed contract. Usually this deadline is specified in the purchase contract.
Earnest Money Submission Date. If you are the buyer's agent, collect the earnest money from your client and return it to your broker. Written verification of the acceptance of earnest money must be recorded by the buyer's agent and submitted to the listing agent by this specific date. The buyer's agent's admin will deposit it into a brokerage account and they will be in charge of either disbursing it at closing, potentially returning it to your client, or potentially allocating it to the seller depending on how the transaction conspires.
Inspection Deadline. This is the time permitted to have a formal inspection of the real estate. If your client requires additional specific inspections (for example, a termite inspection, a plumber, a electrician, or a structural engineer), then these inspections must be completed before the original inspection deadline. If this is not possible, then you must write a contract addendum that states that the inspection period will be extended for "x" amount of days. This addendum must have signatures from all parties who are agreeing to this change.
Inspection Negotiations Deadline. This is a window where you can negotiate changes to the real estate or a price reduction based on the results of the inspection. If both parties cannot come to an agreement at this point, then you must write and obtain signatures from all parties on a termination of contract that outlines the result of this transaction and names who receives the earnest money.
Loan Approval Deadline. The buyer must obtain loan approval to be issued financing for this purchase by this date and the buyer's agent must report written verification to the listing agent.
Closing Date. When the property is transferred from buyer to seller.
Occupancy Date. When the buyer obtains occupancy for their new property. This is usually on the same day as closing.

Put these dates in your calendar and do not miss any of them. If you know you will not make any of these deadlines, then be sure to communicate with the listing agent and write an addendum to the contract that amends that date. If you miss any these dates, it will impact your client’s position in purchasing the home, possibly cost your client money, or could leave you subject to a fine from the MLS.

Action items for your client (the buyer):

Submit loan application to their lender and obtain pre-approval letter
Signature original contract and/or initial any contract changes
Return all additional paperwork to their real estate agent
Write an earnest money check to buyer’s brokerage
Order an inspection
Review inspection report and decide what points must be addressed before continuing the transaction
Ask loan officer for monthly payment estimate
Ask loan officer for total amount of closing costs
Submit full loan application and send back to loan officer
Purchase homeowner’s insurance
Purchase title insurance
Review settlement sheet
Prepare wire before closing
Compete final walk-through of property
Sign all required closing documentation

Action items for their loan officer:

Approve loan application
Issue pre-approval letter
Obtain disclosures & executed contract
Process loan
Order appraisal
Deliver to underwriter
Issue wiring instruction
Issue clear to close

Action items for you (the buyer’s agent):

Collect all paperwork from the buyer
Pre-approval letter
Executed contract
All disclosures
Submit all paperwork to your admin
Collect earnest money check and deliver it to your admin of managing brokerage and submit proof of acceptance to listing agent
Send executed contract to the buyer’s loan officer
Send executed contract to the title company
Attend inspection
Review inspection report
Negotiate any inspection amendments
Notify listing agent of client’s loan approval
Schedule closing
Schedule final walk-through property
Attend closing

Do not be overwhelmed by the workload, just stay organized and communicate daily with the listing agent, the buyer, the loan officer, your admin, and the title company. Keep a calendar for each client and check it daily. You’ve got this! Maybe one day you’ll have enough clients to hire a transaction coordinator and these mundane tasks will be of the past.

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