What Does It Mean When a House for Sale Is Under Contract?

When browsing through real estate listings, you may come across the term “under contract” associated with a house you’re interested in buying. But what exactly does it mean when a house is listed as “under contract”? In this comprehensive article, we’ll dive into the details of what it means when a house is under contract, the common contingencies involved, additional things to consider, and how to proceed if you’re interested in purchasing such a property.

What Does “Under Contract” Mean in Real Estate?

When a house is labeled as “under contract” on a real estate website, it indicates that the seller has already accepted an offer from a prospective buyer. However, it’s essential to understand that the sale is not yet finalized. Certain conditions, known as contingencies, must be met before the property can be officially sold.

Common Contingencies in Real Estate

1. Securing Financing: One of the most prevalent contingencies is the buyer’s need to secure financing. They must obtain a mortgage or loan to cover the purchase price of the property. If the buyer is unable to secure financing within the specified timeframe, they may have the option to back out of the contract.
2. Passing a Home Inspection: Another critical contingency is the home inspection. The buyer may conduct a thorough inspection of the property to identify any potential issues or defects. If significant problems are discovered, the buyer may request repairs or renegotiate the terms of the contract. In some cases, they can back out of the deal if an agreement cannot be reached.
3. Selling the Current Home: For buyers who need to sell their current home before purchasing a new one, this contingency is vital. They may include a clause in the contract stating that the purchase is dependent on the successful sale of their existing property. If the buyer’s home doesn’t sell within the specified timeframe, they may have the option to terminate the contract.

Additional Considerations for Buyers

1. Accepting Backup Offers: Sellers may choose to accept backup offers even after a primary buyer has put the property under contract. If the initial buyer backs out, the seller can turn to these backup offers and check if any of those potential buyers are still interested in proceeding with the purchase.
2. Limited Showings: Once a house is under contract, the seller may limit or completely halt showings to maintain the privacy of the buyer and their family. This measure is taken to prevent additional disruptions to the property during the contract period.
3. Price Negotiability: When a house is under contract, the price is typically considered fixed. Both the buyer and seller have already agreed upon a specific price during the negotiation phase, and any further attempts to renegotiate the price are unlikely to be successful.

Acting Swiftly as a Potential Buyer

If you’re interested in buying a house that’s under contract, it’s crucial to act quickly. Since the seller may be accepting backup offers, there’s a chance that the initial buyer may back out, leaving an opportunity for you to step in. Moreover, if you need financing or have to sell your current home, being prompt is essential to ensure a smooth and successful purchase.

Frequently Asked Questions (FAQs)

Q: Can the seller accept backup offers while the house is under contract?

A: Yes, sellers have the option to accept backup offers. If the initial buyer’s contract falls through, the seller can consider these backup offers to proceed with the sale.

Q: Why might a house under contract not be available for showings?

A: Once a house is under contract, the seller may restrict showings to protect the privacy of the buyer and their family.

Q: Is the price of a house under contract negotiable?

A: Generally, the price of a house under contract is not negotiable. Both the buyer and seller have already agreed on a fixed price during the negotiation process.

Q: Can the buyer back out of the contract if contingencies are not met?

A: Yes, if any of the contingencies specified in the contract are not met, the buyer may have the option to back out of the deal.

Q: What happens after all contingencies are met?

A: Once all contingencies are met, the buyer and seller will proceed to sign the closing documents, and the sale will be finalized.

Q: How can I increase my chances of purchasing a house under contract?

A: To increase your chances, be prepared to act quickly, have your financing in order, and be flexible with any necessary arrangements, such as selling your current home.

Conclusion

When a house is under contract, it means that the seller has accepted an offer from a buyer, but the sale is not yet completed. Several contingencies must be met before the sale is finalized. Buyers need to secure financing, pass a home inspection, and may have to sell their current home. Additional considerations include the possibility of accepting backup offers, limited showings, and the fixed price of the house. Acting promptly and being well-prepared are crucial if you’re interested in purchasing a house under contract. By understanding the process, contingencies, and potential scenarios, you can navigate the real estate market with confidence and make informed decisions as a buyer.