In real estate, a home is considered “under contract” when the seller has accepted a buyer’s offer in writing. This means that both parties have agreed to the terms of the sale, including the price, closing date, and any contingencies. However, the sale is not yet final, as there are still certain steps that need to be completed before the closing can take place.
Common Contingencies in Real Estate Contracts
- Financing contingency: This contingency gives the buyer the right to back out of the contract if they are unable to obtain financing.
- Appraisal contingency: This contingency allows the buyer to back out of the contract if the home appraises for less than the agreed-upon purchase price.
- Home inspection contingency: This contingency gives the buyer the right to back out of the contract if the home inspection reveals any major problems with the property.
- Sale of buyer’s current home contingency: This contingency allows the buyer to back out of the contract if they are unable to sell their current home.
Other common contingencies in real estate contracts include:
- Insurance contingency: This contingency gives the buyer the right to back out of the contract if they are unable to obtain insurance for the property.
- Title contingency: This contingency allows the buyer to back out of the contract if there are any problems with the property title, such as liens or easements.
- Environmental contingency: This contingency allows the buyer to back out of the contract if the property is found to be contaminated with hazardous materials.
What Happens After a Home Goes Under Contract?
Once a home goes under contract, the buyer and seller will begin the process of fulfilling the contingencies. This may involve working with a mortgage lender, appraiser, home inspector, and real estate attorney. The buyer will also need to schedule a closing date, which is the day when the sale is finalized and ownership of the home is transferred to the buyer.
How Long Does It Take for a Home Sale to Close After It Goes Under Contract?
The amount of time it takes for a home sale to close after it goes under contract varies depending on the specific circumstances of the transaction. However, it typically takes around 30-45 days to close on a home.
What Happens if a Contingency Is Not Met?
If one of the contingencies in a real estate contract is not met, either party has the right to back out of the contract without penalty. For example, if the buyer is unable to obtain financing, they can cancel the contract and receive their earnest money deposit back.
Can a Seller Accept Backup Offers After a Home Goes Under Contract?
Yes, sellers can accept backup offers after a home goes under contract. This is because the sale is not yet final until all of the contingencies have been met. If the initial offer falls through, the seller can then accept one of the backup offers.
What Does It Mean When a Property Is “Active Under Contract”?
When a property is listed as “active under contract,” it means that the seller has accepted an offer from a buyer, but the sale is not yet final because one or more contingencies have not yet been met. Sellers may still accept backup offers during this time, in case the initial offer falls through.
When Is a Sale Considered Closed?
A sale is considered closed when all of the contingencies have been met and the buyer and seller have signed the closing documents. Once the closing is complete, the buyer will take ownership of the property and the seller will receive the proceeds from the sale.
What’s The Difference Between Sale Pending Vs. Under Contract?
Sale pending and under contract are two terms that are often used interchangeably in real estate. However, there is a slight difference between the two.
Under contract means that the buyer and seller have agreed to the terms of the sale and signed a contract. However, the sale is not yet final, as there are still certain steps that need to be completed before the closing can take place. These steps may include fulfilling contingencies, obtaining financing, and transferring title.
Sale pending means that all of the contingencies in the contract have been met and the sale is on track to close. The property is typically removed from the market at this stage, and the closing date is scheduled.
In short, a property that is under contract is still in the process of being sold, while a property that is sale pending is very likely to be sold.
Here is a table that summarizes the key differences between sale pending and under contract:
| Characteristic | Under contract | Sale pending |
|---|---|---|
| Contract status | Signed, but not yet finalized | Finalized |
| Contingencies | May still be outstanding | All contingencies have been met |
| Property status | Still on the market | Removed from the market |
| Closing date | Not yet scheduled | Scheduled |
Tips for Buyers and Sellers
Tips for Buyers
- Carefully review the contract and understand all of the contingencies before signing.
- Get pre-approved for a mortgage before making an offer.
- Schedule a home inspection to identify any potential problems with the property.
- Obtain homeowner’s insurance before closing.
Tips for Sellers
- Be prepared to accept backup offers in case the initial offer falls through.
- Make sure the property is in good condition and ready to show.
- Order a title search to ensure that there are no liens or other encumbrances on the property.
- Be responsive to the buyer’s requests throughout the process.
Conclusion
A home under contract is a sign that the sale is progressing well. However, it is important to remember that the sale is not yet final until all of the contingencies have been met and the closing has taken place. Buyers and sellers should both stay in close communication with their real estate agents throughout the process.
Frequently Asked Questions (FAQ)
What happens when you are under contract?
When you are under contract, it means that you are legally bound to perform the terms of the contract. This means that if you fail to perform your obligations under the contract, the other party may be able to sue you for damages.
What does it mean to be under a contract?
To be under a contract means that you have entered into an agreement with another party that is legally binding. This means that you are both obligated to fulfill your respective obligations under the contract.
What do you call someone under a contract?
A person who is under a contract is called a contracting party.
Why is it called a contract?
The word “contract” comes from the Latin word “contractus,” which means “drawn together” or “agreed upon.” This is because a contract is an agreement between two or more parties that has been mutually agreed upon.
What are the 3 types of contracts?
The three main types of contracts are:
- Bilateral contracts: These are contracts in which both parties make promises to each other. For example, a contract for the sale of a house is a bilateral contract because the buyer promises to pay the seller a certain amount of money in exchange for the seller’s promise to transfer ownership of the house to the buyer.
- Unilateral contracts: These are contracts in which only one party makes a promise. For example, a reward offer is a unilateral contract because the person offering the reward promises to pay a sum of money to anyone who provides certain information or completes a certain task.
- Express contracts: These are contracts that are created through oral or written words. For example, a contract for the sale of a car is an express contract if the buyer and seller agree to the terms of the sale in writing.
What are the 7 requirements of a contract?
The seven essential elements of a contract are:
- Offer: A promise by one party to another to perform a specific act in exchange for something of value.
- Acceptance: The agreement of the other party to the offer.
- Consideration: Something of value that is exchanged between the parties to a contract.
- Capacity: The ability of the parties to a contract to enter into a binding agreement.
- Legality: The subject matter of the contract must be legal.
- Mutual assent: Both parties must agree to the terms of the contract.
- Definiteness: The terms of the contract must be clear and definite.
What is the difference between a contract and an agreement?
Not all agreements are contracts. A contract is a legally binding agreement, while an agreement is simply an understanding between two or more parties. In order for an agreement to be a contract, it must meet all of the essential elements of a contract.
Is a contract a legal agreement?
Yes, a contract is a legal agreement. This means that the courts will enforce the terms of a contract if one party breaches the contract.
Is every agreement a contract?
No, not every agreement is a contract. In order for an agreement to be a contract, it must meet all of the essential elements of a contract.
What is a valid contract?
A valid contract is a contract that meets all of the essential elements of a contract. It is important to note that a contract may be valid even if it is not in writing.
