What Does Under Contract Mean in Real Estate? An In-Depth Explanation




What Does Under Contract Mean in Real Estate

Finding out what “under contract” means in real estate can be confusing. This term means a seller has agreed to a buyer’s offer, but the sale isn’t final yet. Our article breaks down this concept, making it easier for you to understand every step of the process.

Keep reading to clear up your confusion!

What Does Under Contract Mean In Real Estate

Understanding 'Under Contract' in Real Estate 249712375

What does under contract mean In real estate? “Under contract” means a seller says yes to a buyer’s offer. This step happens before the sale is final. The home stops being advertised for others to buy. Still, this phase has big steps left.

Things like checks and getting a loan matter a lot now.

A home under contract might still need things like an appraisal or inspection. Buyers and sellers work with agents to make sure everything goes right. If all these tasks are done well, the house moves closer to being sold for real.

‘Under Contract’ vs ‘Sale Pending’: Distinguishing the Differences

'Under Contract' vs 'Sale Pending' Distinguishing the Differences 249712450

“Under contract” and “sale pending” are steps in selling a house. They might seem the same, but they have differences. A house becomes “under contract” when a buyer makes an offer and the seller says yes.

This means they agree on the price and conditions but still need to do more things before the sale is final. These things include checking the house, making sure the buyer can pay, and other checks.

On the other hand, “sale pending” happens after all these steps are done. It means all conditions of the sale met approval and now they just wait for paperwork to finish up. During this time, it’s hard for new buyers to make offers because it’s almost certain to sell to that first buyer.

Role of Contingencies in Under Contract Phase

In the under contract phase, contingencies act as safety nets for both buyers and sellers. They help make sure everything is fair and clear before the deal closes. Want to learn more? Keep reading to find out how this part of real estate deals works!

Appraisal Contingency

Appraisal contingency is a key part of many real estate contracts. It means that the house must be worth what the buyer offers to pay, as decided by a professional home appraisal. If the appraisal shows the home’s value is less than the offer, the buyer can back out or try to negotiate a lower price.

This protects buyers from overpaying.

In my own work as an estate agent, I’ve seen deals nearly fall apart because of low appraisals. But often, either we find a way to make it work by adjusting the sale price, or buyers decide to cover the difference themselves if they really want the house.

Making sure everyone understands this contingency helps keep surprises at bay and ensures deals move forward more smoothly.

Home Inspection Contingency

home inspection contingency lets a buyer check the house for problems before they buy it. This part of a real estate deal means if something big is wrong, like a bad roof or faulty wiring, the buyer can ask the seller to fix it.

They might also lower their offer or even back out of buying the house without losing their earnest money deposit.

Real estate agents play a key role here. They help both sides understand what’s found during inspections and negotiate any changes to the deal. This step is crucial in making sure buyers know exactly what they’re getting into and sellers are fair about their home’s condition.

Financing Contingency

Financing contingency is a key part of many real estate deals. This clause lets the buyer off the hook if they can’t get a mortgage loan within a certain time. It’s like a safety net.

If the bank says no to the loan, the buyer can leave without losing their down payment. In my own work as an agent, I’ve seen how this gives buyers peace of mind. They know they won’t be stuck if their financial situation changes or if banks are tight with money.

For sellers, this means waiting nervously to see if the deal will go through. Deals can fall apart when buyers don’t secure mortgages in time. That’s why some sellers prefer offers without this contingency, especially in a competitive market.

But remember, it’s all about finding that balance between risk and reward – for both sides of the sale.

Possible Outcomes if a Contract Falls Through

Sometimes in real estate, deals don’t go as planned. A contract falling through can change a lot for both buyer and seller. Here’s what might happen next:

  1. The house goes back on the market. The property is listed again for others to see and buy. This means starting over with new showings and hoping for more offers.
  2. Seller may look for backup offers. If there were other people interested before, the seller might reach out to them now. It’s like having a plan B.
  3. Buyer loses their deposit. If the deal falls apart because of the buyer, they might not get their money back. This deposit is meant to show they’re serious about buying.
  4. Negotiations start again. Both sides might try to fix what went wrong with the deal. They could talk about changing the price or terms of the sale.
  5. Legal issues could come up. If someone didn’t follow the contract rules, there could be trouble. Lawyers might need to get involved to sort things out.

Each point shows that much can change when a real estate deal doesn’t close as expected.


“Under contract” means a deal is happening, but it’s not done yet. Big steps must happen, like checks on the house and loan approvals. The house waits for its new owner during this time.

Things might change, and deals can fall through. But when all goes well, the buyer gets the keys. This part of buying or selling a house is full of hope and hard work from everyone involved.

For more insights on how properties transition in the real estate market, explore our comprehensive guide on industrial real estate.

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