When Doesn’t “Sold” Mean “Sold?”
When it comes to residential real estate, when does “Sold” not mean “Sold?”
When it means “Pending” (as in, when there’s a big, bold “Sold” sign in front of a “For Sale” home).
At least in Minnesota, once the Buyer’s Inspection has been removed,** the convention is to switch a home’s status from “Active” to “Pending” on MLS, and to put a “Sold” rider on top of the “For Sale” sign in front of the home.
That’s the case even though the home hasn’t closed yet ” and the Buyer’s loan most likely hasn’t been finally underwritten (or even successfully appraised!).
Of course, that’s in addition to any title work still to be done, as well as any other outstanding conditions that the Buyer and Seller may have contractually agreed ” or be subject ” to (repairs, obtaining a municipal inspection certificate, etc.).
Isn’t declaring such a home “Sold” like spiking the ball on the 2 yard line?
It can be.
However, once any Inspection issues have been resolved, the odds of a deal closing go up dramatically; from experience, I’d peg the odds at anywhere from 80% to 98%.
Why the range?
If it’s a cash deal and the Buyer is richer than Croesus . . . it’s virtually a done deal.
However, especially if the Comp’s are thin and the sales price lacks recent, nearby precedent, the risk of an appraisal issue goes up.
Too, if the Buyer works for a company that’s vulnerable to layoffs or their job is otherwise at risk, there’s still a chance that the Buyer will suffer a pre-closing hit to their creditworthiness, jeopardizing their mortgage approval.
Less likely, but still within the realm of possibility, are such things as: Buyer health issues; an unexpected job relocation; major damage to the home (fire or weather-related); or even a simple change of heart (and mind).
All cheery thoughts for Sellers, I know . . .
“Pending” vs. “Closed”
So, to repeat, why not put up a sign that says “Pending” rather than “Closed” ” or remove the “For Sale” sign altogether?
My take is that it’s a mix of the following three reasons:
One. Psychologically, putting up “Sold” helps cement the Buyer’s commitment (see, “change of heart”).
Two. “Sold” better tells prospective Buyers that the house is spoken for, and not to bother the homeowner.
Three. Marketing exigencies. Whereas “Pending” sounds equivocal and gray, “Sold” is strong and declarative.
Too, because there is a risk that the house won’t close, it’s premature to remove the sign.
However, once the risk of not closing is effectively zero, i.e., the Seller has been paid, title has transferred to the new owner, and the “For Sale” is removed . . . there’s nothing to attach “Sold” to.
**Buyers can signal via email or even verbally that they intend to remove the Inspection Contingency.
However, Sellers (and listing agents!) who want to be safe should either: a) have the Buyer do an Amendment removing the Inspection Contingency; or b) wait for the Inspection period to lapse (= waiver).