How to Put a House Under Contract for Buyers

When a house is “under contract,” a buyer and seller have formally agreed to a transaction, signing a real estate contract outlining the terms of the sale. This signifies a mutual commitment, though the sale is not yet finalized. The property is no longer actively on the market, but certain conditions, known as contingencies, must be met before ownership transfers. These conditions protect both parties, ensuring requirements are satisfied before the deal is complete.

Preparing Your Offer

Before drafting a purchase offer, buyers should prioritize financial readiness by obtaining mortgage pre-approval. This involves a lender reviewing a buyer’s financial situation, including credit score, income, and debt, to determine the maximum loan amount they qualify for. A pre-approval letter clarifies one’s budget, allowing buyers to focus their search on affordable homes. It also signals to sellers that the buyer is serious and financially capable, strengthening an offer in a competitive market.

Understanding current market conditions is another important preparatory step. Researching comparable sales, or “comps,” and local market trends helps inform a competitive offer price and terms. This involves analyzing recent sales of similar properties, considering factors like size, age, and features, and observing how long properties remain on the market. Identifying personal priorities, such as the desired closing date, down payment amount, and any specific items to be included or excluded from the sale, further refines the offer strategy.

A real estate agent plays a valuable role in this phase. They assist buyers by providing insights into local market dynamics and advising on strategic decisions. An agent can also help structure an offer that aligns with both market realities and the buyer’s financial capabilities. Their expertise helps ensure the offer is well-informed and positioned for success.

Key Components of the Purchase Agreement

A standard residential purchase agreement includes essential information and specific clauses that define the terms of the transaction. This document identifies the parties involved, including the full names of the buyer and seller, the property’s address, and its legal description.

The agreement specifies the offer price and the earnest money deposit. Earnest money demonstrates the buyer’s commitment, typically 0.5% to 10% of the purchase price, and is usually held in an escrow account. This deposit may be forfeited if the buyer defaults on the contract without valid reason. The contract also details how the purchase price will be furnished, whether through cash, a mortgage, or a combination.

Contingencies protect the buyer, allowing them to withdraw from the contract under certain conditions without losing their earnest money. A financing contingency gives the buyer a set period, often 30 to 60 days, to secure mortgage approval. If financing cannot be obtained, the buyer can terminate the agreement. An inspection contingency permits the buyer to conduct a home inspection and request repairs or terminate the contract based on findings.

An appraisal contingency protects the buyer if the property’s appraised value is less than the offer price, allowing for renegotiation or termination. The purchase agreement also establishes the agreed-upon closing date and when the buyer will take possession. It lists all items, such as appliances or fixtures, included in or excluded from the sale to prevent future disputes.

The agreement addresses clear title, meaning the property is free from liens or other legal claims, and any required seller disclosures. Sellers are required to disclose known facts that might affect the property’s value or desirability. Federal law mandates disclosure of lead-based paint hazards in homes built before 1978, and many states have additional disclosure requirements.

The Offer and Acceptance Process

Once the purchase agreement is prepared, the formal offer is presented to the seller, typically facilitated by real estate agents. This initiates the negotiation phase, where the seller considers the proposed terms. The seller has several options: accept it as is, reject it, or make a counter-offer.

A counter-offer is a formal response that modifies certain aspects of the original offer, such as the price, closing date, or contingencies. When a seller issues a counter-offer, the original offer is no longer valid. The buyer can then accept the new terms, reject them, or submit another counter-offer. This exchange continues until both parties reach a mutual agreement or terminate discussions.

Negotiation strategies involve a balance of research, flexibility, and clear communication. Buyers may highlight their financial readiness or offer concessions like a flexible closing timeline to make their proposal more appealing. In situations with multiple offers, sellers use strategies to encourage the best terms, and buyers may need to present their strongest offer upfront. Only a written agreement signed by all parties is legally binding; verbal agreements are not enforceable in real estate transactions.

Finalizing the Contract

The contract becomes legally binding, or “ratified,” once all parties have agreed to and signed the final terms. This marks the official start of the contract’s obligations and timelines. The ratification date sets the clock for all specified deadlines and contingencies within the agreement.

Following ratification, the earnest money deposit is delivered to an escrow agent or title company. Copies of the fully executed contract are then distributed to all relevant parties, including the buyer, seller, their respective agents, the lender, and the title company. The period while the house is under contract is dedicated to satisfying these contingencies, such as completing inspections, securing final mortgage approval, and conducting a title search, all leading toward the eventual closing of the sale.