When a house is under contract, it means that a buyer has made an offer on the property and the seller has accepted it. As per this, the buyer and seller have to sign a legally binding contract that outlines all the details regarding the terms of the sale and the buying process such as purchase price, closing date, closing costs, closing day, closing paperwork, closing table, closing process closing time, closing fees, client documents, as well as contingencies. Essentially, the under-contract period refers to the transient time during which a buyer agrees to the sales price of the house and proceeds with all the necessary things to complete the purchase. They usually have a specific amount of time, during which they must complete necessary inspections regarding the contract property they are buying with a professional home inspector, secure financing, and complete any other necessities as directed in the purchase contract. However, if the buyer does not meet the common contingencies or cannot proceed with the purchase due to some other reason, the legally binding agreement will no longer be valid and the house will be up for sale once again. On the contrary, once the buyer meets all the requirements and has the necessary personal finances, the sale will go on to the closing stage, where the buyer will pay the sale price and consequently, the seller will transfer ownership of the house. After the sale is over, the house is no longer under contract.
Meaning of Being Under Contract
Being under contract means that a legally binding agreement has been made between the buyer and seller of a property. According to this purchase agreement and the contract between buyer and seller, the potential buyer has to meet the terms and conditions of the sale, only after which the sale will be completed. Once a house is under contract, the property is technically off the market for sale and cannot be sold to another buyer since one offer has already been accepted. During that time period when the house is under contract, the buyer must fulfill the contingencies in order to buy the house. That being said, if the buyer fails to meet requirements or decides not to buy the property, the under-contract period gets terminated.
Can a buyer back out once they’re under contract?
Yes, a buyer can back out once they are under contract. However, the consequences and requirements for doing so depend on the terms and conditions that have been outlined in the current contract. Plus, the laws of the state also play a role here. Usually, a buyer can back out of the contract without penalty. In case a buyer fails to satisfy any contingency, he or she is eligible for terminating the contract and getting a complete refund of any earnest money deposit made. However, the buyer must have a valid reason for backing out. Because, if they don’t, or if they breach the agreement, the seller is usually entitled to retain any earnest money deposit or faith deposit as a kind of compensation. Therefore, it is very important that real estate buyers first review the contract fully before they decide to go ahead with the offer.
Under contract doesn’t mean sold
Under contract doesn’t mean sold. That is because it typically refers to a period of time when the buyer has accepted the offer made by the seller and is thus, getting ready to satisfy contingencies and gather funds. Sold means that all the contingencies have been met and the house is no longer in the current market. There is no place for backing out anymore.
Under contract Definition
Under contract is defined as a period where the seller has made an offer on a house and a buyer has accepted it. During this time, the buyer has to meet certain contingencies and carry out all the necessary tasks to successfully attain the house. It is not the same as being sold because the buyer still has the option of backing out, be it because of their own fault, contingency issues, inspection issues, or due to any problems they might have with the property.
Under contract vs contingent
Under contract Vs. contingent mean different things. “Under contract” and “contingent” are related terms in real estate contracts, but they have slightly different meanings. On one hand, an under contract is defined as a period where the seller has made an offer on a house and a buyer has accepted it. Here, both parties have signed a legally binding contract and the buyer gets a specific time frame to meet requirements. However, on the other hand, a contingent contract refers to a condition that has to be met before the property can be sold. For instance, a sale can be “contingent” on the outcomes of the property inspection. In case a contingency is not met, for some time, the contract can be terminated. It is important to remember that under contract and contingent are not exclusive terms since a house can be both under contract and contingent. There can be different kinds of contingencies such as sale contingency, inspection contingency, financing contingency, appraisal contingency, mortgage contingencies, etc.
Under Contract FAQS
Here we have discussed Under Contract FAQs.
If a house is under contract can it still be shown?
Yes, if a house is under contract, it can still be shown and included in real estate listings. However, it is not recommended or even common. In fact, sometimes, it can even go against the conditions of the original contract. A breach of contract could be dangerous for your property too. In fact, there could be a breach of contract lawsuit. That being said, sometimes sellers continue to show houses to prospective buyers just to have backups in case the sale does not go through as planned.
What to do if a house you love is under contract?
If a house you love is under contract, the best thing you can do is to wait out and see if the current buyer backs out and the contract falls through. Alternatively, a house under contract could be available for which you can work with a real estate agent and submit a backup offer on the house. Lastly, you can keep looking for other houses.
How Often Does A House Under Contract Fall Through?
It is not very common for a house under contract to fall through. In fact, the national percentage for the rate of failed home sales is around 1% to 4%. It keeps on varying, depending on property conditions, the local current market for real estate, real estate terms and the contract terms.