In real estate, phrases like “on the market” and “sold” are pretty straightforward. But when a property is “under contract,” things get a little more muddled. What does it mean when a house is under contract — is the property sold? Can offers still be made? Understanding this term is crucial for navigating real estate transactions with confidence. In this blog, we’ll dive into what exactly “under contract” means.
What Does “Under Contract” Mean in Real Estate?
Let’s say a house is listed for sale, and the seller has accepted an offer. When that offer is accepted, both parties sign a contract — but the contract typically has terms that must be fulfilled before the sale is complete. These terms can vary depending on a lot of factors, but can include:
- Passing Inspections
- Completing Repairs
- Re-Inspections
- Mortgage Processing
- Title Issues
Perhaps the contract requires the seller to install or repair a fence on the property, replace damaged deck boards, or have electrical repairs done. On the other hand, the buyer may need to go through a loan process that includes verifying their employment, bank information, paid taxes, and other tasks that can take some time. This is why homes can sit in the “under contract” stage of a sale for weeks.
How a Real Estate Agent Can Help
Whether you’re buying or selling a home, the process can be complicated and even tedious. But when it comes to choosing whether you’ll use a real estate agent or not, the answer is clear.
When you connect with an agent through IDEAL AGENT, you’ll get help navigating the entire process, from the very first showing to the day the keys are exchanged. And with commissions as low as 2%, you can trust they have your best interest in mind. Connect with us today to meet your agent.
FAQs About Under Contract
No specific rules or laws state how long a home can be under contract. Many contracts have time limits built in, but some people have reported homes being under contract for as long as six months, while others are complete within days (typically when buyers pay in cash.) The average time a home spends under contract, though, is between 30 and 60 days.
- Financing Issues: When a buyer is pre-approved, they aren’t actually guaranteed a mortgage. If, during the process, lenders discover misreported credit, inaccurate income information, or even a spouse they weren’t informed of, financing can either fall through entirely or must be started over.
Related: How long does an executor have to pay beneficiaries?
- Appraisal Problems: When a home is listed for sale, it must be appraised to ensure the asking price is fair for its actual value. Sometimes, the appraisal comes in lower than the selling price. In these cases, the lender may refuse to provide financing for the full amount, and the sale would likely fall through.
- Failed Inspections: When a home inspection reveals a significant issue — like major foundation problems or mold — it may lead to renegotiations or even a buyer walking away to find a more suitable property.
Sellers can accept backup offers while under contract, but should be very clear about the status of their acceptance. Once both parties have signed the agreement, the seller cannot legally accept another. Sellers can, however, accept multiple offers and work through the contracts simultaneously, finalizing only the contract that is completed first.
While a home under contract hasn’t completed all the required steps to close the sale, a home listed as “pending” sale means that all contingencies have been met, and the sale is close to being finalized.
Even after contracts are signed, sellers may want backup offers in case any of the above causes their sale to fall through. While your offer may be a little less likely to be accepted in this case, you can often still view it in an “under contract showing.” It may be worth making an offer if you love the property. Conversely, an “under contract no show” is when a seller feels confident in the pending sale and chooses to remove the listing and no longer show the home.
