What Does “Under Contract” Mean In Real Estate?
The term “under contract” means that a buyer has made an offer on a home and the seller has accepted it. This does not mean that the sale is final. There are still several things that need to happen, and it is possible that the sale could fall through. It’ estimated that about 20 percent of “under contract” sales do not end up closing, and those homes will be back on the market.
There are three criteria that must be met to make a real estate contract valid:
- There must be an offer. The buyer promises to pay a certain amount for the home, and in exchange for the payment, the seller agrees to transfer ownership of the home.
- There will need to be a payment of some sort. The most common form of payment is money. The seller must accept the offer.
- The parties must agree on the terms of the contract.
A home will be listed as “under contract” once these basics have been met. When the buyer and the seller have both signed the contract and the seller has communicated to the buyer that the contract is accepted, the online lists and the for sale signs can be switched from active to “under contract.”
A buyer interested in an “under contract” home might still be able to make an offer.This is known as a backup contract. The backup offer that you submit must have a contingency written into it that says the current contract must be terminated and voided before your contract can close on the sale of the house.
If the seller accepts your backup contract, you will not be able to make an offer on another home without a contingency stating that the offer is void if your backup contract closes.
If you have a home that you have fallen in love with but it is under contract, you or your agent should keep your eyes out for a status change. If it changes from under contract to active, you can make an offer and work with the sellers to have your offer accepted.
Related real estate articles on Under Contract: