Understanding ‘Under Contract’ in Real Estate: A Comprehensive Guide

Understanding ‘Under Contract’ in Real Estate: A Comprehensive Guide

Real Estate Contracts

What Does Under Contract Mean in Real Estate?

In real estate, entering into a contract marks a significant step in buying or selling property. This status indicates that a buyer has made an offer on a property, and the seller has accepted it, but the sale still needs to be finalized. This phase is critical, as it sets the stage for various processes and legal obligations that ultimately lead to the transfer of ownership.

Understanding Real Estate Transactions

Real estate transactions are complex and involve multiple stages. At its core, a property going ‘under contract’ signifies that both parties – the buyer and the seller – have agreed to the terms of the sale. However, this is just the beginning. From here, numerous steps such as inspections, appraisals, and financing come into play, each carrying its challenges and requirements.

The Meaning of ‘Under Contract’ in Property Deals

Being ‘under contract’ does not mean the property is sold. It’s a conditional agreement, often subject to various contingencies that must be met before the sale is finalized. These conditions can include financial approval, satisfactory property inspections, and more. It’s a period of due diligence and preparation for both parties involved.

The Process of Placing a Property Under Contract

Initial Steps in Real Estate Agreements

The journey to placing a property under contract begins with the buyer expressing interest through a formal offer. This offer includes the price and terms and conditions under which the buyer is willing to purchase the property.

How Offers Translate into Contracts

Once an offer is made, the seller can accept, reject, or counter it. If the seller accepts the offer, the property is officially considered ‘under contract.’ This contract is a legally binding document outlining the terms of the sale, including price, closing date, and contingencies.

Can a Home Under Contract Be Sold to Someone Else?

A home under contract generally means that the seller has accepted an offer from a buyer and both parties have signed a purchase agreement. This agreement is legally binding, but there are certain circumstances where a home can still be sold to someone else:

Backup Offers

If the initial contract includes a clause allowing the seller to continue showing the home and accept backup offers, a higher or more attractive offer could change the buyer.


In the context of an apartment sale Washington, D.C., it’s common for contracts to include contingencies such as financing approval, home inspections, or the successful sale of the buyer’s current residence. Failure to meet these contingencies can result in the contract being nullified, thereby enabling the seller to entertain other offers.

Breach of Contract

It can be terminated if either party fails to meet the contract terms. This could happen if the buyer doesn’t meet deadlines for securing financing or the seller fails to address agreed-upon repairs.

Mutual Agreement

Both parties can mutually agree to terminate the contract, allowing the seller to sell to someone else.

Legal Implications of Being Under Contract

Binding Nature of Real Estate Contracts

When a property goes under contract, it creates a binding legal agreement between the buyer and the seller. This means both parties are legally obligated to fulfill the terms outlined in the contract. Both buyers and sellers must understand the legalities involved and ensure that they are in a position to comply with these obligations.

Rights and Obligations of Parties Involved

Both the buyer and seller have specific rights and responsibilities under the contract. For the seller, this typically means maintaining the property’s condition and adhering to agreed-upon terms for the sale. For the buyer, it involves securing financing, conducting inspections, and meeting other conditions specified in the contract.

What Happens When a House Goes Under Contract?

When a house goes under contract, several steps are set in motion to move toward closing the sale:

  • Inspection and Appraisal: The buyer typically arranges a home inspection, and the lender will order an appraisal.
  • Contingency Period: This is the time frame for the buyer to satisfy or waive contingencies like financing, inspection, and appraisal.
  • Title Search and Insurance: A title company will research the property’s history to ensure everything runs smoothly when transferring ownership, and they’ll arrange for title insurance.
  • Securing Financing: The buyer works with their lender to finalize the mortgage.
  • Final Walkthrough: The buyer usually does this to ensure the property’s condition has stayed the same since the initial agreement.
  • Closing: All parties meet to sign the final documents, and the buyer pays the seller. The property ownership is then transferred to the buyer.
Wife feeling amazing while buying new apartment with husband while standing near realtor

Buyer’s Perspective: Entering a Contract

Making an Offer: The Buyer’s Initiative

The first step for a buyer in the contracting process is making an offer. This offer should reflect the price they are willing to pay and any conditions they require for the purchase. It’s a strategic move that sets the tone for the negotiations and subsequent contracts.

From Offer to Contract: A Buyer’s Journey

Once an offer is made, the buyer enters a critical phase. If the offer is accepted, they must work diligently to meet the contract’s conditions, such as securing a mortgage, conducting property inspections, and ensuring the property meets their standards and requirements.

Seller’s Viewpoint: Accepting a Contract

Receiving and Considering Offers

For sellers, receiving an offer is just the beginning. They must carefully consider each offer’s terms, including price, contingencies, and the buyer’s financial standing. It’s a balancing act between getting the best deal and ensuring the sale progresses smoothly.

The Decision to Go Under Contract

Deciding to go under contract is a significant step for sellers. It involves committing to a specific buyer and starting the process of transitioning the property. The seller must be prepared for the obligations this entails, such as adhering to the terms of the contract and facilitating various inspections and appraisals.

What Could Make a Home Purchase Contract Fall Through?

Several factors can cause a home purchase contract to fall through:

  • Financing Issues: The most common reason is the buyer’s inability to secure financing. This could be due to a low appraisal, changes in the buyer’s credit situation, or the lender’s inability to verify the buyer’s income or employment.
  • Home Inspection Issues: Major issues revealed during the home inspection, like structural problems or significant repairs, can lead to a contract falling through, especially if the seller is unwilling to make repairs or lower the price.
  • Title Issues: Problems with the title, such as liens or disputes over property boundaries, can halt the process.
  • Buyer’s Remorse or Change in Circumstances: Sometimes, buyers change their minds, or their life circumstances change (like job loss or family issues), making them unable to proceed with the purchase.
  • Contingency Failures: Failure to meet other contingencies, like selling the buyer’s current home, can also result in the contract falling through.

Both buyers and sellers should be aware of these potential pitfalls and work closely with their agents and legal advisors to navigate or mitigate these issues.

Contingencies in Real Estate Contracts

Common Contractual Contingencies

Certain contingencies must be met in many real estate contracts for the sale to proceed. These include a satisfactory home inspection and the buyer’s ability to secure financing or sell their home. Understanding these contingencies is crucial for both buyers and sellers, as they can significantly impact the progress and outcome of the sale.

How Contingencies Affect Contract Status

Contingencies can provide both parties a safety net but also introduce uncertainty elements. For example, if a home inspection reveals significant issues, the buyer may renegotiate or even back out of the deal. Sellers should be prepared for such scenarios and understand their options should contingencies still be met.

The Role of Agents and Brokers

Responsibilities of Real Estate Professionals

Real estate agents and brokers are pivotal in buying and selling properties under contract. They guide their clients through the complexities of the transaction, from understanding the contract terms to navigating contingencies and negotiations.

Navigating Contracts with Professional Help

A knowledgeable agent or broker can be invaluable, especially when dealing with intricate contract details and negotiations. They can provide expert advice, help understand the legal jargon, and protect their clients’ interests throughout the transaction process.

Inspections and Appraisals in the Contract Phase

Property Inspection Essentials

Property inspections are a critical part of the process when a property is under contract. They assess the property’s condition and can uncover potential issues that may need to be addressed before the sale can proceed.

Importance of Appraisals in Contractual Agreements

Appraisals are equally important as they determine the property’s market value. This is crucial for both the buyer in securing financing and the seller in ensuring they get a fair price for their property.

Row of just finished new brown townhouses

Under Contract vs. Contingent vs. Pending

These terms are often used in real estate to describe the status of a property sale, and they have distinct meanings:

Under Contract

This means the seller has accepted an offer and signed a purchase agreement. However, the sale is still being determined as contingencies typically need to be met.


This status is similar to under contract, but it emphasizes that the sale depends on certain conditions being met. Typical contingencies include inspections, appraisals, and the buyer securing financing.


A pending status usually means that all contingencies have been met or waived, and the sale is moving toward closing. There are fewer chances of the sale falling through at this stage.

Understanding these terms helps gauge the likelihood of a property sale’s completion and potential to return to the market. Buyers and sellers should know each status’s specific terms and conditions to navigate the home buying or selling process effectively.


What happens if a buyer or seller backs out of a real estate contract?

If a party backs out of a real estate contract, they may face legal consequences and potential financial penalties, depending on the terms of the contract and local laws.

Can a property under contract still be shown to other potential buyers?

Yes, a property under contract can still be shown to other buyers, typically in case the current contract falls through, although this depends on the terms agreed upon in the contract.

How long does a property typically stay under contract before closing?

The duration can vary, but it usually takes 30 to 60 days for a property to move from under contract to closing, contingent on the specifics of the deal and financing processes.

Are there any penalties for not fulfilling contract obligations in real estate?

Failing to fulfill contract obligations can result in penalties such as forfeiture of the earnest money deposit or legal action based on the contract’s terms.

What role do real estate agents play when a property is under contract?

Real estate agents assist in navigating the contract process, ensuring compliance with its terms, and addressing any issues that arise before closing.

How can buyers protect themselves when a property is under contract?

Buyers can protect themselves by conducting thorough inspections, ensuring contingency clauses are in place, and seeking legal advice to understand their rights and obligations.


In conclusion, understanding what it means for a property to be ‘under contract’ in real estate is crucial for both buyers and sellers. It signifies a commitment but also a period of critical actions and decisions. Navigating this phase requires knowledge, attention to detail, and often the guidance of experienced professionals.

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