Can a House Under Contract Be Sold to Someone Else?

A common question in real estate is whether a house “under contract” can be sold to a different buyer. The binding nature of contracts is central to determining the permissibility of such actions, establishing clear boundaries for both sellers and prospective buyers. Understanding these agreements is important for anyone involved in buying or selling property.

Understanding the “Under Contract” Status

When a property is “under contract,” it signifies that a seller has accepted an offer from a buyer, and both parties have signed a binding purchase and sale agreement. This agreement details the terms and conditions for the exchange, including the price, payment plans, and any conditions that must be met before the deal can close. Essential elements include clear identification of all parties, a detailed property description, and the agreed-upon purchase price. This status indicates that the sale is progressing, but it is not yet finalized, as certain contingencies still need to be satisfied.

This “under contract” phase is distinct from a property being “listed” or “active,” where it is openly available for offers. While “pending” is sometimes used interchangeably, both terms imply a binding agreement and the property is typically taken off the active market. Once the contract is signed, legal obligations arise for both the buyer and the seller. This period usually lasts four to eight weeks, during which the agreed-upon stipulations are addressed.

Binding Obligations for Buyers and Sellers

Once a property is “under contract,” both the buyer and seller assume specific responsibilities. The seller is obligated to sell the property exclusively to the contracting buyer and should not entertain other offers, unless explicitly allowed by specific contract clauses. The seller must also provide a transferable title, which often requires clearing any existing mortgages or liens.

The buyer, in turn, has obligations such as securing necessary financing, which is a common contingency in real estate contracts. Buyers are also responsible for completing inspections and adhering to all agreed-upon deadlines outlined in the purchase agreement. An earnest money deposit (typically 1% to 5% of the home’s sale price) demonstrates the buyer’s serious intent. This deposit is usually held in an escrow account by a neutral third party until closing, and it can be applied toward the buyer’s down payment or closing costs.

Conditions for a Subsequent Sale

A house under contract can only be sold to a different buyer under specific, limited circumstances, requiring the original contract to be terminated or void. One scenario is buyer default, where the original buyer fails to meet contractual obligations, such as missing deadlines for financing approval, inspections, or closing, or failing to deposit earnest money. In such cases, the seller may have the right to retain the earnest money as liquidated damages.

Another common reason for contract termination is when contingencies outlined in the agreement are not met. These contingencies often include financing approval, a satisfactory home inspection, or an appraisal meeting the agreed-upon price. If a contingency is not satisfied or waived by the buyer within the specified timeframe, the buyer can typically walk away from the deal without penalty, and the contract can be terminated. Both the buyer and seller can also mutually agree in writing to terminate the existing contract, which dissolves their obligations and allows the seller to pursue other buyers.

Seller’s rights to terminate are generally more limited but can exist if the buyer fails to adhere to contract terms or if specific clauses, such as a “kick-out clause,” exist. A kick-out clause allows a seller to continue showing the house and accept a new offer, usually if the initial offer has a contingency like the buyer needing to sell their current home. If a new, stronger offer emerges, the original buyer is given a short period, often 72 hours, to remove their contingency and proceed, or the seller can “kick out” the original buyer in favor of the new offer.

In situations where an initial contract is at risk of falling through, sellers may entertain backup offers. A backup offer becomes legally binding only if the initial deal officially terminates, providing a safety net for the seller without obligating the backup buyer until the primary contract falls through.

Consequences of Contract Breach

If a seller attempts to sell a property to a different buyer while a valid contract with the original buyer is in effect, it constitutes a breach of contract with serious legal and financial ramifications. One significant consequence is the buyer’s ability to sue for specific performance. This legal remedy forces the seller to complete the sale per the original contract terms, compelling them to transfer the property to the initial buyer, even if a higher offer was received. Courts often grant specific performance in real estate due to the unique nature of each property, where monetary damages alone may not adequately compensate the buyer.

Beyond specific performance, the buyer can sue for monetary damages to compensate for losses incurred due to the breach. These damages can include the return of the earnest money deposit, along with any costs associated with the transaction, such as inspection fees, appraisal fees, and legal expenses. The buyer may also seek compensation for increased costs if they have to purchase a similar property at a higher price. The breaching party may also be responsible for the other party’s legal fees. Such legal actions can lead to substantial financial liabilities for the seller.