Understanding “MLS Status’s” and Basic Strategies
Almost every day, someone calls me to check on the status of a home for sale. Sometimes the reason for their call is because the home they saved to their ‘favorites’ has either disappeared, or some strange new status is attached to it. Not being familiar with what types of status changes there are and how to interpret them can prove to be a bit confusing for a home buyer attempting to navigate the market.
Below is a summary definition of all the available statuses our NWMLS allows us to use. Let’s start here with clarification, and explain further how to interpret these statuses:
Active – Property is currently available for sale, and the status is subject to change at anytime.
Contingent – Property is pending sale with a contract signed by the buyer and seller. Sale is contingent upon the buyers’ sale of their own property.
Pending – Property is pending sale with a contract signed by the buyer and seller.
Pending BU – Property is pending sale with a contract signed by the buyer and seller. Seller is encouraging back-up offers.
Pending Feasibility – Property is pending sale with a contract signed by the buyer and seller. Sale is contingent upon the buyers’ satisfaction from a feasibility study of the subject property.
Pending Inspection – Property is pending sale with a contract signed by the buyer and seller. Sale is contingent upon buyers’ approval of inspection, and/or mutual agreement between buyer and seller for repairs or other remedies.
Pending Short Sale – Property is pending sale with a contract signed by the buyer and seller. Sale is subject to the purchase agreement being acceptable to the sellers’ lien holder.
Sale Fail Release – Sale of property has failed to close escrow, and seller has removed the property from the market.
Cancelled – Seller has cancelled the listing agreement, and has removed the property from the market.
Temporarily Off Market – Property has been temporarily taken off the market, with the intention of returning to the market at a later time.
Expired – Listing contract timeline for subject property has expired.
Rented – Property was rented instead of being sold.
Sold – Property is sold and no longer available on the market.
‘Active’ and ‘Sold’ properties seem to be self explanatory, but it’s the other categories that usually offer the most consumer questions. So let’s begin with the biggest question that I commonly hear. “It says Pending, does that mean it’s too late to buy this home?” Not necessarily. The seller is already committed by contract to a buyer to purchase their property. But this agreement is usually subject to the successful conclusion of certain contingencies before the sale can be finalized.
Contingencies, such as the buyers financing, an inspection report that is favorable to the buyer, an approval by the sellers lien holder if the home is a distressed property, and maybe even a review of the neighborhood and/or CCR’s must all pass the buyers preference in order for this sale to be final. The purchase contract on this Pending property may end up being rescinded for reasons that may not have any bearing on your interests.
So if you like the home and would otherwise be happy with it, the process of submitting a back-up offer is simple to do and you can continue to keep looking for something better while waiting for the outcome of the first buyer.
Another common question I hear is “Can I just bid above the current buyer and be in first position?” If you are participating in a public auction – like a Trustee Sale or Sheriff’s Sale, you can certainly compete with other bidders. Likewise, there are opportunities to bid online for short sales and bank-owned homes, but only a select few companies participate in this practice.
And regardless of how the buyer gets their offer accepted, once a seller enters into a contract with a buyer, that contract is legally binding and cannot be trumped simply by getting a higher offer. Additionally, there is no requirement for a seller to disclose the accepted price, terms and/or conditions of the offer – at least not until the sale closes escrow.
Sometimes people will call me about an expired property, and won’t know what it means when I tell them, ‘it’s expired’. When agents list a property for sale, they use a listing contract that states the terms and conditions of selling the property. For a listing contract to be valid, it must have a start date and expiration date.
When a listing has been on MLS for the duration of what was agreed upon by the agent and seller, and the property has not sold, the listing will expire by default if no action is taken ahead of time to modify the contract.
Does this mean an expired property is no longer available to purchase? That’s a great question for your agent to assist you with!
How negotiable is the price? In what circumstances should buyers dicker with the sticker? When should they offer a lower price, or a higher price?
How negotiable is the price? The short answer to this is – How negotiable is the seller? Every seller is different, as is every agent representing every seller is different. Some sellers actually understand what the market is doing and could be open to negotiating, while other sellers are concerned about issues that have no bearing on the homes true market value, and may not even entertain an offer that is lower than their list price.
My best advice for ‘dickering with the sticker’ is this: First of all, don’t use advice from people that haven’t purchased Real Estate since the first Bush Administration or longer. Get advice from people that understand the market conditions as they exist now. When you have your initial consultation with your agent, have them show you the statistics that surround your interests. What price range are you working in? What location do you want to live in? What is the average price for a home that meets your basic criteria, and how does the list price compare with the sale price as an average?
If you take the time to look over the statistics of what kind of market activity is going on in your area of interest, it will likely help you put together a tangible plan for successfully negotiating a sale.
I’ve heard lots of old school advice from people with the best of intentions, “If the offer doesn’t make you feel embarrassed when you offer it, it’s not low enough.” Is that good advice? How open do you think a seller would be negotiating with you if you write them an insulting offer?
Put yourself in the seller’s shoes, how would you react to receiving a bad low ball offer? You would probably reject the offer, and you would not likely have any confidence in the buyer if they tried to make counteroffers that look better than their initial offer. How well is that low ball strategy going to work for you when you’re competing with other buyers that are offering more money, and better terms?
There’s a better way to get a good deal on a home, while making it a win-win environment for everyone. If your only motivation is to attempt your luck at getting something for nothing, you’re wasting your time and the time and energy of others.
When you’re dickering with the sticker, it’s important to note – everything counts. Everything you ask for from the seller has an effect on their bottom line, and should be accounted for when you’re negotiating your offer amount and terms. If you’re making a full price offer on a house of $230,000 and are including seller paid buyer closing costs in your offer, is it actually full price? No. Assuming your closing costs amount to 3½% of the purchase price, you are making an offer to the seller of $221,950.
So let’s say the seller accepts your offer, and after having the home inspected, you ask for repairs to be made. The repair estimates amount to $2,400 – taking more from the seller’s bottom line. Now your offer price is $219,550, which equates to a 5% reduction from the original list value. Depending upon the market conditions that you’re working in, this may be enough of a reduction to cause a seller to seek other options – like checking in with his back-up buyer.
This is all the more reason to take the time and understand what is going on in your market. What is reasonable to negotiate, and what practice or behavior is too risky if you want to be sure that you have the home secured? You may want your offer to be for more money if you will be asking for concessions like closing costs. Instead of giving the seller a laundry list of repair items, you may want to negotiate for the seller to include a home warranty.
To summarize, your success in finding a home and negotiating a great deal will depend on how well you and your agent are taking the time to understand the condition of your market. Learning the hard way of taking shots in the dark can be painful – especially when it involves finding the one home that all your hopes are set on, only to watch another more educated buyer secure it out from under you.
Be the educated consumer that knows what they want, and knows what they have to do stand above the competition, while also knowing how to negotiate price, terms and conditions for the best possible deal.
Knowledge is power, and nothing extraordinary comes easy. Make the effort to be in the know, and you will be the envy of your peers.