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What Is the Difference Between Escrow & Pending Sale?
“Pending sale” and “escrow” each describe a stage of the home buying process, and for the most part, have very similar meanings. But there are also situations in which the terms can mean a world of difference to those involved.

Pending Sale
Most real estate agents classify a home sale as pending after the seller and buyer have signed a purchase contract. At this point in the process, both parties are locked into the agreement and legally required to follow through with their contractual obligations. For the sellers, this means they are committed to selling the home to the contracted buyers—although in some cases, the seller reserves the right to accept backup offers. As its wording implies, a backup offer is a bid from another home buyer, which the seller promises to accept if the original deal falls through.

Regional Interpretations
Depending on the region in which a home is located, the term “pending sale” could carry a different meaning. In some areas, the classification indicates a contract has been signed and there are no contingencies -- conditions on which the sale of the home is hinged -- that might prevent the deal from closing. Contrarily, when a contingency contract has been signed, the status of the sale may be listed as “contingent.” In another interpretation, a home sale is considered pending after the seller accepts an offer. This version differs dramatically from its counterparts in that either party -- each of whom has yet to sign a binding contract -- can bow out of the deal without any legal repercussions.

Escrow Defined
A home sale enters the escrow stage after both parties have signed the purchase contract and the buyer puts down a deposit, which is placed in a third-party escrow account, from which it will be released to the seller when the deal closes. If either party breaches the purchase contract, the other may be able to claim the deposit and walk away from the deal. There’s very little difference between escrow and the most common definition of a pending sale. In fact, in many cases the “escrow” label is passed over and a property goes from “pending” to “sold.”

The Pending Sale/Escrow Commitment
Unless the house in question is located in a region in which a sale is considered pending after an offer has been accepted, it would take a lot more than a better offer or a change of heart to pull the plug on the sale in either case. For one of the parties to legally back out, the other would have to commit a breach of contract. But even that won’t necessarily kill the deal. For example, if the buyer fails to come up with the purchase money by the specified closing date, the seller can’t put the home back on the market until he first serves the buyer with a Notice to Perform. This legal document gives the buyer a specific amount of time to close the deal. In most cases, the buyer -- not wanting to lose the deposit -- will make a concerted effort to meet the new deadline. For their part, the seller -- not wanting to begin the arduous process all over again -- will likely work with the buyer to get the deal closed.

Adapted from an article by John Machay on  

This material is not intended to be relied upon as a statement of the law, and is not to be construed as legal, tax or investment advice.  You are encouraged to consult your legal, tax or investment professional for specific advice.  The material is meant for general illustration and/or informational purposes only.  Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. 

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