What Does "Under Contract" Mean in Real Estate?
In simple terms, “under contract” means a buyer has made an offer on a property, the seller has accepted it, and both parties have signed a purchase agreement. However, don't rush to celebrate, the deal isn’t closed yet—several steps need to happen before ownership officially transfers.
How Does Being "Under Contract" Affect Buyers and Sellers?
Once a home is under contract, the seller agrees to take the property off the market while the buyer completes inspections, appraisals, and finalizes financing. Here’s what both parties should expect:
For Buyers:
This is your chance to arrange inspections and ensure everything about the property checks out. Pay close attention to your must haves and non-negotiables.
Preferably you have secure your financing already. If not, you will need to do so. You’ll also need to secure financing if you haven’t already.
For Sellers:
Your home is technically off the market, but keep an eye on deadlines in case the buyer backs out. Although the contract has been signed, closing can still fall through.
Be prepared to negotiate repairs if inspections uncover any issues.
What Can Happen While a Property Is Under Contract?
A property under contract doesn’t always mean the sale is guaranteed. Here are some possible scenarios:
Inspection or Appraisal Issues: If the inspection finds major problems, the buyer can request repairs or ask for a price reduction. Similarly, if the appraisal is lower than the agreed price, the buyer may renegotiate if they have bank financing. Banks will not pay more than the house is worth.
Financing Problems: Buyers who can’t secure a loan may need to back out of the deal unless they have a financing contingency in place. This is typically outlined in the purchase agreement.
Contingency Deadlines: Buyers must meet contingency deadlines—like completing inspections or securing a mortgage—by specific dates. Missing these deadlines could allow the seller to cancel the deal. Again, this is all outlined in the purchase agreement.
What Happens After a Property is Under Contract?
If everything goes smoothly, the next step is closing—the final meeting where ownership transfers from the seller to the buyer. Most often, the buyer will complete a final walkthrough, and both parties sign the required paperwork to officially seal the deal.
Conclusion
In real estate, “under contract” signals that both the buyer and seller have agreed to move forward with the sale, but the deal isn’t done until closing. This period is crucial, as inspections, appraisals, and financing must all come together smoothly. Understanding what “under contract” means will help you better navigate your next real estate transaction, whether you’re buying or selling and determine when you can celebrate or not.
The information in this article are of the opinion and experience of the author. Due diligence should always be exercised before venturing into real estate.
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