A Full Understanding of What It Means to Be Under Contract in the World of Real Estate
When you are selling or buying a home, there is a phase that you will enter, termed "under contract" in the world of real estate. Under contract means that the seller and buyer have to agree on a home sale in writing. This does not make the deal final, and there is room to submit an offer on the house. Before signing on the dotted line, there is much that you need to know.
In this article, we will take a closer look at what it means to be "under contract" and the role this phase plays in real estate.
What Does "Under Contract" Mean?
A home is under contract when a seller and buyer have signed papers and dated a legal document to purchase the desired home. The written agreement will provide important details about the buying and selling parties and the property that is being purchased, along with a breakdown of the costs and overall price involved in the final transaction. Once both parties have signed the contract, they are then legally bound to follow all terms of the agreement. The term "contingent" can be thrown in when referring to a home that is under contract. This means there are conditions, aka contingencies, that have to be met before the sale can move forward.
What Does "Active Under Contract" Mean in Real Estate?
If you hear the phrase "active under contract," this only means that the seller has accepted an offer from a prospective buyer, but is still open to accepting backup offers from other buyers. If the sale should fall through due to contingency issues or financing problems, the seller will consider their backup offers.
Under Contract Vs. Pending
When house hunting, you might notice the words "under contract," "contingent," or "pending" on the real estate listing. As a prospective buyer, some differences should be noted about the following terms:
- Contingent/Under Contract: A home listing with either of these statuses will mean that there is a chance that the current buyer and seller are working through conditions in the contract.
- Pending: If a home sale is pending, the buyer has either signed off on contingencies or made an offer without any at all. There is a chance that the deal may fall through on a financing contingency if the mortgage is denied, you are more than likely going to need to resume your househunting.
Can a Buyer Still Back Out When They are Under Contract?
Under special circumstances, a buyer is still able to back out of an offer once they are under contract. Financing, inspections, appraisals, and home sale contingencies give buyers a legal way to cancel the contract without losing money upfront or facing other legal consequences. There are less common scenarios a buyer may be able to bail out of a purchase contract, including the following:
- An Attorney Review Clause is Added: Depending on where you are located, local laws allow for a buyer to back out of a contract without penalty if it is canceled after being reviewed by a real estate attorney. In this case, the review period is often three business days.
- Property Title is Unable to Be Transferred: If a title search uncovers problems, your ownership of the home can be affected, like unpaid contractor liens or property tax bills, meaning the sale can be canceled if the title cannot be produced by the seller.
Bottom Line
Have you come across a listing that is "under contract"? Chances are, you aren't entirely out of luck–yet. Under contract often means the deal has unmet buyer contingencies, and the seller is open to receiving backup offers. It is always worth reaching out to the seller and asking questions regarding making a bid. Work closely with your agent to ensure you are making a smart plan that will protect your financial interests. Trust the real estate professionals at Houses in Omaha Team to guide you in finding and settling down in the home of your dreams in the many suburban neighborhoods that make up Elkhorn, NE, today.
