When looking for a home of your dreams, the most feasible and widely preferred way is to look out for it on different real estate websites. If you have already started the search then you may have come across the term ‘under contract’. That may have left you to wonder what does under contract mean in Real estate? Will further looking for the details of such a property be a waste of time? A layman’s term for under contract is that the buyer and seller have signed a contract accepting each other’s offers. However the buyer has not handed over the keys of the house to the seller yet. Now you might be thinking why is such property not listed under the ‘sold’ or the ‘pending’ section. Well because all these terms are different.
WHAT DOES UNDER CONTRACT MEAN IN REAL ESTATE?
While dealing with the sale and purchase of a property there are certain contingencies that have to be met. These contingencies are mentioned in the contract that is signed by both the parties i.e., the buyer and the seller. This includes financial contingencies, appraisal contingencies, inspection contingencies and sales contingencies. After the exchange of the contract between the seller and the buyer the respective property is under construction. Although it is not sold yet.
So in answer to what does under contract mean in real estate it can be said that it is a contract between the seller and the buyer enlisting certain contingencies that have to be met before the final deal. Any of the two parties can call-off the deal. This will allow the property to return into the real estate market again.
CALLING OFF THE DEAL
A deal can be mothballed due to various reasons. Some of the most common reasons can be:
- The seller has found a buyer paying more than the previous buyer
- The buyer has found a better property
- The buyer is unsatisfied with house inspection
- Personal discontent
COOLING -OFF PERIOD
To reconsider the purchase and carry out any further inspection the buyer is given 3-5 business days. This is called the cooling-off period. During these days the buyers can back out from the deal by paying a penalty amount. The amount of penalty given as per the cooling-off period is not ubiquitous.
CAN AN ‘UNDER CONTRACT’ PROPERTY BE BACK TO THE MARKET?
Of course yes! So does this mean you can still place your eyes on one one such property? If you’re lucky enough then yes. If a deal is called-off by any of the two parties then this means the property is ready to be launched again in the market. However the buyer is not allowed to make a deal with any other seller once the property is listed under the ‘under contract’ list. Even so in some places the seller is allowed to have a backup offer. Under this a seller may accept offers from other buyers if he thinks that the ongoing deal may fall through.
‘UNDER CONTRACT’ AND ‘PENDING’
A property listed under ‘pending’ is much closer to getting sold. It implies that all the contingencies and requirements have been met and the home is about to be sold. The probability of mothballing the deal is very low. However in the ‘under contract’ list the contingencies and requirements are yet to be met and the deal may be called off.
It can be really disappointing to have finally found your dream home and then get it taken away at the final stages. By understanding that what does under contract mean in real estate you can prepare yourself for some worst case scenario. Although under contract does not mean that a deal is finally done but it also doesn’t mean that no steps have been taken towards claiming the house of your dreams. It simply means you are almost there.