Home Buying in 27104>Question Details

Merri, Both Buyer and Seller in Winston Salem, NC

What do "pending AB" and "due diligence" mean?

Asked by Merri, Winston Salem, NC Mon Feb 28, 2011

A house that we're interested in went under contract on Friday. As of earlier today, the status online hadn't changed from active, so I called the listing agent to inquire. She said it was under contract and then said something about due diligence and that she would let me know if something fell through. Does that have something to do with the inspection?

As of later today, the house is now listed as "pending AB." What exactly does that mean? My understanding has been that other offers are allowed, like maybe a contigency contract - is that correct? Thanks so much for your help! :)

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The due diligence period is an opportunity for the buyer to investigate the property and the transaction contemplated by the contract and to determine, in Buyer’s sole discretion, whether or not to terminate or proceed with the transaction. During this period, no other buyers can "jump in front of" their contract with the seller.
It should be marked Pending accepting backups.
Taking YOU in the Direction YOU Want to GO in REAL ESTATE!!

Thanks,
Ellen Dudley
Web Reference: http://www.Ellen-Dudley.com
0 votes Thank Flag Link Mon Feb 28, 2011
yes...it does have to do with inspections and anything else the buyer needs to know about the property from zoning to the ability to get insurance, etc. AB= accepting back-ups...just in case the initial contract falls through. A contigency contract could also be involved, but not necessarily. Tell me what you are looking for and we can find you the right property!!
0 votes Thank Flag Link Mon Feb 28, 2011
Hello Merri

Simply Put, Pending AB means that there is a contract, however the seller is accepting back up offers. There is a more detailed explanation that should be provided by your Realtor providing all of the pros and cons when making a backup offer or accepting a backup offer on a property. Due Diligence is a period that can come with a fee, where the seller & buyer has come to an agreement in the contract to have "all things done" sort a speak (loan, inspections, appraisal, repairs, etc.) This also has a more detailed definition that can be explained by your Realtor. If you have more questions and/or would like a sample copy of the Offer to Purchase Contract. Please let me know.

Crystal D
0 votes Thank Flag Link Mon Feb 28, 2011
Merri, Our new Offer to Purchase and Contract has replaced the negotiated time traditionally allowed for Inspections with an "option" period. Now the Buyer purchases an option period for due diligence, i.e. inspections, buyer considerations, in short any investigation the Buyer cares to do, for a nominal amount paid directly to the Seller. The money paid for this time will apply to the Purchase Price at closing. During this due diligence period the Buyer can decide not to proceed with the Contract for any reason whatsoever in which case the money paid for this "option" period is retained by the Seller and the property goes back on the market.

Pending AB means the property is under Contract but the Seller is Accepting Back-ups. The property will remain Pending AB for the "option" period or until such time as the Buyer makes a decision to void the Contract. In the latter case, any Seller accepted Back-up would then become the new Contract.

Merri, I hope this has been of some help. Feel free to contact me direct if you have any further questions.

Kind regards, Michael.

Michael F. Adamson
Broker in Charge/Owner/REALTOR®
Realty Executives Triad
1316 Westgate Center Dr
Winston Salem NC 27103
Cell 336-418-0551
Fax 336-768-5837
0 votes Thank Flag Link Mon Feb 28, 2011
Hi Merri,

As my associates have already stated, Pending AB is the MLS designation for Pending, Accepting Backups. While this is not a new status for listings, it will become more common for agents to use it now that we have the "Due Diligence" Offer to Purchase and Contract.

The Due Diligence is more than just a time for inspections. this is just what the name implies, a time for the buyer to excercise due diligence. While inspections may be one such item to address, there are others. For example, loan conditions. The previous contract had an escape clause that typically was longer than the inspection period. The buyer merely had to be uncomfortable with the loan going through to walk away from the contract. Now, the buyer must be confident before the due diligence period expires or lose the earnest. Another item could be homeowners insurance. Most people don't realize it but there are homes that are uninsurable for many reasons. Making sure that insurance is available or affordable falls into due diligence. The appraisal also falls into the due diligence period with the exception of loans underwritten by FHA.

There are many things that a buyer should be aware of pertaining to the due diligence period. Your agent should be able to educate you on most of these scenarios as they are explained in the contract. There are always exceptions however, so always proceed with caution.

If you do not have an agent, I would be happy to work with you. I am member of the NC Assoc of Realtors Forms Committee that created the current Due Diligence form over the last several years. As such, I have taught other agents around the state how to use this form. Feel free to contact me direct anytime.

Len Montgomery
Better Living Carolina Realty
Winston Salem, NC
336-812-8128
0 votes Thank Flag Link Mon Feb 28, 2011
With our new NC contract the due diligence date is what I like to call the
Web Reference: http://Thecarolinacrew.com
0 votes Thank Flag Link Mon Feb 28, 2011
Hi Merri,
Pending AB means there is a contract on the home pending, however the agent will accept back up offers.

With an offer to purchase and contract, the Due Diligence period, is the time frame that you have to get all of your inspections, your mortgage loan in place, appraisal, etc.. and during that time frame , if you decide you do not want to continue to purchase the home, you can walk away from the contract to purchase for any reason or no reason at all.

I would be happy to talk with you further about buying and selling a home, please call me at 336-659-8091 or email me at ruthmcmasters@realty1properties.com
0 votes Thank Flag Link Mon Feb 28, 2011
Pending AB means "a contract is pending on the property, but the seller will still entertain other offers in a backup position".

However, right now we are using the pending ab status in lieu of the due diligence status because our MLS system has not been switched over.

The due diligence period is an opportunity for the buyer to investigate the property and the transaction contemplated by the contract and to determine, in Buyer’s sole discretion, whether or not to terminate or proceed with the transaction. During this period, no other buyers can "jump in front of" their contract with the seller.

So, the bottom line is that the buyer that has a pending contract on the property is within this due diligence time period. Your only option would be to submit and negotiate an offer to purchase and contract that would be in a "back up" position to the existing contract.
Web Reference: http://www.pamboyle.com
0 votes Thank Flag Link Mon Feb 28, 2011
Merri, Pending AB means pending accepting backup offers. Some agents will put that as the status so that the house will still be shown. Other times it could mean that it is not a slam dunk deal and there are doubts that it will go through. The due diligence period is now what the inspection period used to be. You will pay the seller a certain agreed upon amount for them to take it off the market for a certain time period where the buyer will do all their inspections etc. At the end of the due diligence period you either take it or leave it. The buyer can back out for any or no reason. Once the period is over it means that you are going forward with purchacing the house and if you don't you will loose your EM deposit. I hope that this helps. Please feel free to contact me with any other questions. Thanks
Jonathan Key
0 votes Thank Flag Link Mon Feb 28, 2011
"Pending AB" means that the home is under contract, but accepting back up offers. "Due Diligence" is the period of time that the buyer must have all inspections completed and repairs agreed upon.
0 votes Thank Flag Link Mon Feb 28, 2011
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