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By Christopher Taylor•Last Updated April 18, 2025

Under Contract in Real Estate: Complete Guide to Pending Home Sales

What does’ under contract’ mean in real estate?

In the real estate world, few terms create amp much confusion as’ under contract.’ this status represent a critical transition period in a property transaction when a buyer and seller have agreed to terms but haven’t withal complete the sale. Understand this phase is essential for anyone buy or sell property.

When a property is under contract, it means the seller hasacceptedt an offer from a buyer, and both parties hasignedign a purchase agreement. Yet, the deal isn’t final still. Several steps must occur before the property formally change hands.

Under contract vs. Pence vs. Contingent: key differences

These terms oftentimes get use interchangeably, but they represent different stages in a real estate transaction:

Under contract

This broad term indicate that a buyer and seller have agreed on price and terms. The property is efficaciously off the market, though technically the seller can stock still entertain backup offers. During this period, various contingencies mustbe satisfiedy.

Contingent

A property list as contingent mean the seller has accepted an offer with specific conditions that must be meet. Common contingencies include:

Home inspection contingency
Finance contingency
Appraisal contingency
Home sale contingency (buyer must sell their current home )

If these conditions aren’t meet, the buyer can typically back out without penalty and recover their earnest money deposit.

Pence

A pence status normally indicates that all contingencies have beensatisfiedy, and the sale is move toward closing. At this point, the likelihood of the deal fall through is importantly reduce.

The timeline of a property under contract

When a property goes under contract, itriggerser a sequence of events that typically unfold over 30 60 days:

Earnest money deposit

After sign the purchase agreement, the buyer provides an earnest money deposit, typically 1 3 % of the purchase price. Thisdemonstratese the buyer’s commitment and become part of their down payment at closing.

Due diligence period

This critical phase, normally last 7 14 days, allow the buyer to exhaustively investigate the property. Activities during this period include:

Home inspection to identify structural issues, safety concerns, or need repairs
Pest inspection to check for termites or other infestations
Review of property disclosures provide by the seller
Title search to ensure clear ownership

Contingency resolution

Base on inspection findings, the buyer may:

Accept the property as is
Request repairs or credits from the seller
Disengage from the contract if significant issues are discovered

Simultaneously, the buyer work with their lender to secure financing, and an appraisal is order to confirm the property’s value matches or exceed the purchase price.

Final mortgage approval

Once contingencies are resolve, the lender completes the underwriting process and issues final loan approval. This typically happen 1 2 weeks before closing.

Closing preparation

The title company or attorney prepare closing documents, calculate final figures, and schedule the closing appointment. The buyer conduct a final walk through inspection to verify the property’s condition hasn’t changed.

Closing day

At closing, both parties sign legal documents transfer ownership. The buyer pay closing costs and the remainder of the down payment, and the seller receive proceeds from the sale. Keys are hand over, complete the transaction.

Can a seller rearward out of a contract?

While a purchase agreement is lawfully bind, sellers do have limit circumstances under which they can terminate a contract:

Legitimate exit options for sellers

Contract contingencies

if the contract iincludesseller contingencies (such as find a replacement home )that aren’t satisfied
Buyer default

if the buyer ffailsto meet obligations or deadlines specify in the contract
Mutual agreement

if both parties agree to cancel the contract

Consequences of improper cancellation

If a seller back out for reasons not permit by the contract, they may face serious consequences:

Legal action for specific performance (court order completion of the sale )
Financial liability for the buyer’s damages and costs
Requirement to return the earnest money plus additional compensation
Possible requirement to pay the real estate agents’ commissions

Can a buyer rearward out of a contract?

Buyers broadly have more flexibility to exit a purchase agreement, peculiarly during the contingency period:

Common valid reasons for buyers to cancel

Fail home inspection

discovery of significant defects or safety issues
Financing issues

inability to secure mortgage approval
Low appraisal

property appraise below the purchase price
Title problems

discovery of liens, easements, or ownership disputes
Home sale contingency

failure to sell their current home within the specify timeframe

Financial implications of cancellation

The financial consequences for buyers depend on when and why they withdraw:

During contingency periods: normally can recover earnest money deposit
After contingencies are waived: may forfeit earnest money deposit
Without valid contractual reason: could face lawsuit for specific performance or damages

Make an offer on a house that’s under contract

Find your dream home alone to discover its under contract can be disappointing, but all hope isn’t llost Backup offers serve as insurance for sellers if the primary contract fall done.

How backup offer work

A backup offer is a formal purchase offer that take effect exclusively if the primary contract is terminated. The seller can accept multiple backup offers, rank them in order of preference.

Advantages of submit a backup offer

Secure your position if the original deal collapse
Prevent you from have to compete with multiple buyers if the property return to the market
Demonstrate serious interest to the seller
May include terms more favorable to the seller than the primary offer

Disadvantages of backup offers

Ties up your resources while you wait for an uncertain outcome
May prevent you from pursue other properties
No guarantee the first contract will fall through
Potential for emotional disappointment if the original sale proceeds

Common reasons real estate contracts fall through

Despite both parties’ best intentions, roughly 4 7 % of real estate contracts ne’er make it to closing. Understand these potential pitfalls can help buyers and sellers prepare:

Inspection issues

Home inspections oftentimes reveal problems unknown to either party. Major structural issues, electrical hazards, plumb failures, or roof damage can derail a deal, peculiarly if sellers and buyers can’t agree on repairs or price adjustments.

Financing problems

Yet pre-approved buyers may encounter finance obstacles:

Change in employment or income during the contract period
Discovery of undisclosed debt
Credit score changes
Issues with the property that make it unacceptable to the lender

Appraisal shortfalls

When a property will appraise below they will agree purchase price, it’ll create a gap the lender won’t will cover. Unless the buyer can pay the difference in cash, the sellerreducese the price, or they meet someplace in the middle, the deal may collapse.

Title issues

Title searches sometimes uncover problems that prevent clean transfer of ownership:

Undisclosed liens or judgments
Boundary disputes
Undiscovered heirs with claims to the property
Errors in public records

Tips for buyers when a property is under contract

During the contingency period

Schedule inspections quickly to maximize negotiation time
Stay in regular communication with your lender to address any financing concerns
Respond promptly to requests for additional documentation
Avoid major purchases or new credit applications that could affect your debt to income ratio
Maintain your employment situation

After contingencies are removed

Arrange homeowners insurance
Schedule utilities transfers
Prepare for move logistics
Conduct a thorough final walk through
Review closing disclosure cautiously before closing day

Tips for sellers when your property is under contract

Maintain the property

Continue regular maintenance and lawn care
Make agree upon repairs pronto with qualified professionals
Keep receipts and documentation for all work complete
Maintain utilities until closing
Leave the property in broom clean condition

Prepare for closing

Gather all property relate documents (manuals, warranties, etc. )
Address any title issues instantly
Plan for your move and vacate the property
Prepare to transfer all keys, garage door openers, and security codes
Consider accept backup offers as insurance

Legal aspects of real estate contracts

Real estate purchase agreements are lawfully bind contracts govern by state laws. These documents specify the rights and obligations of both parties and outline remedies if either fail to perform.

Essential contract elements

Offer and acceptance

clear terms that both parties have aagreedto
Consideration

something of value exchange ((ypically earnest money ))
Legal purpose

the contract must be for a lawful transaction
Competent parties

all signatories must have legal capacity to enter contracts
Mutual consent

agreement free from fraud, misrepresentation, or duress

Contract enforcement

If disputes arise, several remedies are available:

Specific performance

court order require completion of the transaction
Liquidated damages

predetermine compensation ((ftentimes the earnest money ))
Actual damages

compensation for provable financial harm
Mediation and arbitration

alternative dispute resolution methods oftentimes require before litigation

Conclusion: navigate the under contract phase

The period when a property is under contract represent both opportunity and risk for all parties involve. For buyers, it’s a time to conduct due diligence and ensure the property meet expectations. For sellers, it’s a transition phase require maintenance of the property while prepare for the next chapter.

Understand the legal obligations, timeline, and potential pitfalls of this phase help both buyers and sellers navigate it successfully. While complications can arise, clear communication, prompt action, and professional guidance from real estate agents and attorneys can help ensure a smooth path to closing.

Whether you’re make an offer, accept one, or consider a backup position on an under contract property, knowledge of this process empower you to make informed decisions in your real estate journey.