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LEGAL DICTIONARY

Under Contract

What Does Under Contract Mean?

Under contract is a real estate term that means a buyer and seller have signed a legal document that provides details of the purchase of a property. The document includes the costs involved in the transaction, the contingencies (or conditions), and the timeline that must be met in order for the sale to go through.

In most cases, the buyer or buyer’s agent will send a real estate purchase agreement to the seller or the seller’s agent. The contract lists the terms and conditions of the proposed transaction. After both parties sign and date the document, they are legally bound to follow the terms of the agreement.

What Are Typical Contingencies When a Property Is ‘Under Contract?’

Contingencies are specific conditions that must be satisfied in order for the sale to be completed. If these contingencies are not met, the buyer can legally back out of the contract without facing any consequences, such as losing their earnest deposit.

Here are the most common contingencies in a real estate contract.

  • Inspection: During a typical period of three days to two weeks, the buyer can hire a professional to inspect the components of the home to see that everything is in good condition and working order.
  • Appraisal: If the buyer is applying for a mortgage to buy the home, they will ask a licensed appraiser to compare the home’s features with similar homes in the nearby area. This step determines how the home’s value corresponds with the selling price.
  • Mortgage: This contingency allows the buyer an out if their mortgage application is turned down. In a hot real estate market, a seller may prefer cash-only offers.
  • Home sale: Some buyers ask for time to sell their current home before the new contract is finalized. Depending on the current market and interest in the property, a seller may accept or reject this contingency.

Under Contract vs. Pending

Do “under contract” and “pending” mean the same thing when it comes to a property that is for sale? The meaning of the terms can vary according to individual state real estate law. Buyers also might see the terms “contingent” or “option” when viewing a real estate listing. It can be confusing.

However, the term “under contract” typically describes a situation in which a buyer has made a formal offer on a property, and the seller has accepted that offer. The timeframe for contingencies to be met is underway.

On the other hand, the term “sale pending” typically describes a contract that has had all the contingencies removed and is closer to a final sale.

The seller’s real estate broker may continue to accept backup offers during the “under contract” time in case the deal falls apart. However, most brokers will not accept other offers in the sale pending phase since the deal is highly likely to go through at that point.

To be on the safe side, if a prospective buyer has any doubt about the meaning of the terms when considering a home purchase, they should confirm the status with the realtor or the homeowner if they are handling the sale of selling their own home.

Start Your Free Warranty Deed Form

Helpful Resources:

Opendoor - What does under contract mean?

LendingTree - What Does Being ‘Under Contract’ Mean?

Total Mortgage - What’s the Difference Between Under Contract and Pending?

What Does Under Contract Mean?

Under contract is a real estate term that means a buyer and seller have signed a legal document that provides details of the purchase of a property. The document includes the costs involved in the transaction, the contingencies (or conditions), and the timeline that must be met in order for the sale to go through.

In most cases, the buyer or buyer’s agent will send a real estate purchase agreement to the seller or the seller’s agent. The contract lists the terms and conditions of the proposed transaction. After both parties sign and date the document, they are legally bound to follow the terms of the agreement.

What Are Typical Contingencies When a Property Is ‘Under Contract?’

Contingencies are specific conditions that must be satisfied in order for the sale to be completed. If these contingencies are not met, the buyer can legally back out of the contract without facing any consequences, such as losing their earnest deposit.

Here are the most common contingencies in a real estate contract.

  • Inspection: During a typical period of three days to two weeks, the buyer can hire a professional to inspect the components of the home to see that everything is in good condition and working order.
  • Appraisal: If the buyer is applying for a mortgage to buy the home, they will ask a licensed appraiser to compare the home’s features with similar homes in the nearby area. This step determines how the home’s value corresponds with the selling price.
  • Mortgage: This contingency allows the buyer an out if their mortgage application is turned down. In a hot real estate market, a seller may prefer cash-only offers.
  • Home sale: Some buyers ask for time to sell their current home before the new contract is finalized. Depending on the current market and interest in the property, a seller may accept or reject this contingency.

Under Contract vs. Pending

Do “under contract” and “pending” mean the same thing when it comes to a property that is for sale? The meaning of the terms can vary according to individual state real estate law. Buyers also might see the terms “contingent” or “option” when viewing a real estate listing. It can be confusing.

However, the term “under contract” typically describes a situation in which a buyer has made a formal offer on a property, and the seller has accepted that offer. The timeframe for contingencies to be met is underway.

On the other hand, the term “sale pending” typically describes a contract that has had all the contingencies removed and is closer to a final sale.

The seller’s real estate broker may continue to accept backup offers during the “under contract” time in case the deal falls apart. However, most brokers will not accept other offers in the sale pending phase since the deal is highly likely to go through at that point.

To be on the safe side, if a prospective buyer has any doubt about the meaning of the terms when considering a home purchase, they should confirm the status with the realtor or the homeowner if they are handling the sale of selling their own home.

Start Your Free Warranty Deed Form

Helpful Resources:

Opendoor - What does under contract mean?

LendingTree - What Does Being ‘Under Contract’ Mean?

Total Mortgage - What’s the Difference Between Under Contract and Pending?