Under contract is a stage in a real estate transaction where you accept the offer from the buyer to purchase your home. However, the sale is not finalized until you and the buyer meet all contingencies.
60% of homes go under contract within two weeks of listing. Additionally, 46% of properties sell in seven days or less.
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What Does Under Contract Mean in Real Estate?
Under contract refers to a written property sale agreement between you and the buyer. This agreement outlines the terms and conditions of the sale.
Once you enter into an agreement, both parties must fulfill their obligations as stated in the real estate contract. It includes the agreed-upon price, closing costs, and any specific conditions or contingencies.
Remember, breaching an agreement can have serious legal consequences. Therefore, it’s important to understand the terms and conditions fully.
How to Get a Property Under Contract?
To get a property under contract, follow these steps:
- Engage a Real Estate Agent: Hire a real estate agent to guide you. They have the expertise to create and manage contracts.
- Set the Terms: Define the agreement terms, including the sale price, closing date, and contingencies.
- Prepare the Property: Ensure that your property is in good condition. Do necessary repairs, organize and declutter, and make the property livable for faster sale.
- Market the Property: To reach potential buyers, employ effective marketing strategies like FFM listing, open houses, and traditional advertising.
- Negotiate Offers: Review offers received and negotiate terms that align with your goals. Also, prepare to counteroffer or accept the offer according to your priorities.
- Draft the Contract: After agreeing on terms, create a detailed agreement with your agent or a lawyer.
- Accept the Offer: Once you draft the agreement and accept the offer, the property enters the status of “under contract.”
What Does Contingent Mean in Real Estate?
Real estate contingent refers to the status of a home sale. In this, either party makes an offer, and it is accepted. However, certain conditions must be met before the deal happens.
Types of Contingencies
- Inspection Contingency: This contingency sets a timeframe for the buyer to hire home inspectors. Discovery of any issues allows negotiation for repairs, price reduction, or contract withdrawal without penalties.
- Financing Contingency: This establishes a timeframe for the buyer to secure a mortgage or other form of financing.
- Appraisal Contingency: A licensed appraiser must assess property value based on criteria and guidelines. If the appraisal falls below the purchase price, the buyer can withdraw without penalties or renegotiate the agremeent’s terms.
- Homeowners Association Contingency: The buyer can withdraw if dissatisfied with the terms or restrictions imposed by the HOA.
Difference Between Contingent and Under Contract
Here’s an explanation of the difference between the two:
Contingent
- Contingent means that a property is under contract. However, it requires meeting specific conditions or contingencies before proceeding with the deal.
- These conditions could include the buyer securing financing, completing a home inspection, or selling the buyer’s current home.
- If the buyer fails to meet the specified conditions, they can cancel the agreement without penalty.
Under Contract
- Being “under contract” means that a buyer and seller have agreed on the terms of the sale. Therefore, the transaction is in progress towards closing.
- Under contract implies that some or all contingencies are met, and the deal is closer to being finalized.
- The property is essentially reserved for the buyer. However, you can go for other offers till the contingencies are met.
What Does “Sale Pending” Mean in Real Estate?
Sale pending indicates that a property is in the final stages of selling. Both parties have fulfilled all the contingencies, and the transaction is progressing toward completion.
At this point, the property is withdrawn from active listing. The house is unavailable for showings or new offers.
Under Contract vs. Pending Sale
Real estate professionals often use the terms “Under Contract” and “Pending” interchangeably. However, they carry distinct meanings.
| Under Contract | Pending | |
|---|---|---|
| Definition | Seller has accepted an offer on the house. | The property has passed all the contingencies, and the sale is about to close soon. |
| Sale Status | Although the property is no longer actively marketed, it is still open to other offers while under contract. | The property is off the market. |
| Buyer’s Rights | The buyer has the contractual right to purchase the property if all conditions are met. | If the specified conditions are satisfied, the buyer is legally bound to purchase the property as per the contract. |
| Contingencies | May still have contingencies pending (e.g., inspections, financing). | All contingencies have been satisfied or waived. |
| Market Availability | Unless stated, the property is generally unavailable for other potential buyers. | Property is unavailable for other buyers. |
| Period | Early stage in the selling process. | Closer to the finalization of the transaction. |
How Long Can a House Be Under Contract?
A house can be under contract for around 30 to 60 days. However, this duration can vary for different real estate transactions. However, it often follows a standard timeline.
If your house is under contract for more than 60 days, you must communicate with the buyer and the real estate pro to change the terms and handle any issues during the extended contract.
Also Read
Land Contract: Learn how land contracts are more flexible than traditional mortgages.
Frequently Asked Questions
What does it mean when a house is under contract?
Under Contract means the buyer and the seller enter into an agreement while the seller still considers to accept new offers.
What does active under contract mean?
Active under contract means the seller signs the sale contract with the buyer. The seller continues accepting offers till all the contingencies are met.
» Contingent in Real Estate: What does contingent mean and how does it affect the sale of a house?
What does pending in real estate mean?
Sale pending refres to a status in which a property is in the final stages of selling.
Can the seller put the house back on the market while under contract?
Yes, you can put the house back on the market under certain circumstances, such as:
1. Buyer Non-Performance: If the buyer doesn't meet contract obligations.
2. Mutual Agreement: If both parties agree to terminate the contract.
3. Failed Contingencies: If the buyer does not meet specific contingencies within the agreed-upon timeframe.
Can a seller back out of a house under contract?
Yes, you can pull out of a house under contract. However, the ability to do so largely depends on the terms outlined in the agreement. As a seller, you can face legal and financial consequences while withdrawing from the contract.
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