What Does it Mean to Be Under Contract?

Real Estate Tips
March 30, 2023

What Does Being “Under Contract” Mean in Real Estate?

While searching for your new home, you may see different real estate listings that say a house is “under contract.” If you’re a first-time homebuyer, you may ask yourself, “What does it mean to be under contract?” The answer to your question can be simpler than you think!

When a buyer is trying to buy a house, they must make an offer to see if they can purchase the property. If a seller approves the buyer’s offer, they will list the home as “under contract.” When a property is under contract, both buyer and seller have signed a written agreement that states details about both parties and the house. Additionally, the agreement will provide information on the home price and costs involved in the transaction. Once everyone signs the contract, they are legally bound to follow the contingencies of that agreement.

However, it’s worth noting that a house listed as “under contract” doesn’t mean the property is sold. The deal can still fall through unless the buyer meets the contingencies on the agreement and closes the home sale. If you’re interested in that house, you could make a backup offer that ensures a contract with the seller if the first offer doesn’t work out! Talk to a Real Estate Agent in Encinitas about backup offers and if they’re an option to consider.

Under Contract vs. Pending Sale: What are the Differences?

You may have also seen the term “pending sale” on different real estate listings. So, it’s natural to wonder what a pending sale is after you ask, “What does it mean to be under contract?”

A pending sale is similar to “under contract,” whereas a seller has accepted a homebuyer’s offer. However, it typically means that a buyer has met most of the contract contingencies, and the deal is on its way to closing. Since a house is close to finishing the sale at that point, it can be challenging to make a backup offer on the property. But don’t give up hope! There could always be the opportunity of the deal falling through or a seller accepting backup offers.

While both options could allow you to make a backup offer, you may fare better with a house under a contract. The reason is that the likelihood of a pending sale falling through is slim compared to a home listed as “under contract.” If you’re curious about which option to choose, you could always contact a Realtor for guidance. That way, you can spend your time and money on a property you may have a better chance with!

Can a Buyer Back Out of a Sale if They are Under Contract?

Yes, homebuyers can back out of a home sale if they face different circumstances. For example, a buyer can withdraw from the sale if they cannot obtain a loan from a mortgage lender. In other cases, if the home inspection reveals issues the seller isn’t willing to fix, the homebuyer can decide to back out from the deal. But that’s not all! Other situations like low home appraisals or problems getting financing could allow buyers the opportunity to back out of a purchase contract.

While homebuyers can abandon a home sale, they could forfeit their earnest money deposit and be sued by the seller for losing the house’s value on resale. If the seller sells the property at a lower price, they could sue the buyer for the difference.

Do You Want to Buy a House with an “Under Contract” Listing?

Now that you know the answer to “What does it mean to be under contract?” it’s time to decide if you want a house with that listing. If you’re inclined to buy a home with an “under contract” listing, you could benefit greatly from speaking with a Realtor in Encinitas. With the help of a Realtor, you could contact a seller with a tempting backup offer for their property.

Contact Realtor Linda Moore to begin the process of getting a home that’s under a contract.