What Does It Mean to Put a House Under Contract?

Putting a house under contract signifies a pivotal stage in the home buying and selling process. It means that a buyer has submitted an offer to purchase a property, and the seller has accepted that offer, leading to a signed, legally binding agreement. This agreement sets the framework for the transaction, outlining the terms and conditions that both parties must fulfill.

While a property being under contract indicates a mutual commitment, it is important to understand that the sale is not yet finalized. This period, sometimes referred to as escrow, is a designated timeframe for various conditions to be met before ownership officially transfers. It allows both the buyer and seller to conduct necessary due diligence and satisfy specific requirements outlined in the contract, ensuring a smooth progression towards the ultimate transfer of the property.

Core Elements of a Real Estate Contract

A residential real estate contract establishes the rights and obligations of both parties. It details the components governing the sale. The contract clearly names all buyer(s) and seller(s).

The property is described in the contract, including its street address and legal description, to avoid ambiguity. The agreed-upon purchase price is explicitly stated, representing the total amount the buyer will pay for the property. This amount is a central term.

Earnest money is funds provided by the buyer to demonstrate serious intent. This deposit, often a percentage of the purchase price, is held in an escrow account by a neutral third party until closing. The contract also specifies a closing date, the anticipated day when the sale will be completed and ownership transferred. This date provides a timeline for both parties.

The agreement delineates inclusions or exclusions, clarifying which fixtures or personal property items are part of the sale. This specifies items like appliances, light fixtures, or window treatments that will convey with the property or be removed by the seller. For the contract to be legally enforceable, all named parties must sign, signifying their acceptance of the terms.

Key Contingencies in Detail

Real estate contracts include contingencies that must be satisfied for the sale to proceed. These clauses protect both parties, allowing withdrawal without penalty if certain circumstances are not met. The inspection contingency grants the buyer the right to have the property professionally inspected. This allows the buyer to identify defects and negotiate repairs or withdraw from the contract.

A financing contingency safeguards the buyer if they cannot secure loan approval. This includes an appraisal contingency, protecting the buyer if the property’s appraised value falls below the purchase price. Should the appraisal come in low, the buyer may renegotiate the price, make up the difference in cash, or terminate the contract.

The title contingency ensures the seller can convey clear ownership. A title search confirms no undisclosed liens, easements, or other claims impede ownership transfer. Any issues must be resolved by the seller before closing. The sale of prior home contingency makes the buyer’s purchase dependent on the successful sale of their current residence within a specified timeframe.

Each contingency provides an opportunity for specific conditions to be met or waived. They allow a party to exit the contract if a defined event occurs or fails, mitigating financial risk. The terms and duration for satisfying each contingency are outlined within the purchase agreement.

The Due Diligence Period

After signing the contract, due diligence begins, during which the buyer investigates the property and secures approvals. The home inspection process is a primary action. The buyer hires a home inspector to evaluate the property’s structural integrity and systems (plumbing, electrical, HVAC). After the inspection report, the buyer may negotiate repairs, credits, or a price reduction based on identified issues.

If the buyer obtains a mortgage, the lender initiates the appraisal process. An appraiser evaluates the property’s fair market value, important for the lender to justify the loan amount. This valuation impacts the financing contingency and the loan amount. Concurrently, loan underwriting unfolds, with the buyer submitting financial documentation (income, assets, credit) to the lender. Underwriters review these documents to assess financial capacity and approve the mortgage.

A title search, typically by a title company, examines public records for defects or encumbrances. This search uncovers issues like unpaid taxes, liens, or conflicting ownership claims, ensuring the seller can transfer clear title. Title insurance is purchased to protect both buyer and lender against future ownership claims. Throughout this phase, communication and negotiation occur among all parties—buyers, sellers, real estate agents, lenders, and attorneys—to address findings, resolve issues, and ensure contractual conditions progress.

Reaching the Closing Table

Once contractual contingencies are met and due diligence concludes, the transaction moves to closing. A final walk-through, usually by the buyer within 24 to 48 hours of closing, is a customary step. This visit ensures the property is in the agreed condition, negotiated repairs are completed, and no new damage has arisen since the initial inspection.

Prior to signing, buyers receive and review closing disclosures, detailed financial statements outlining all costs and credits. These documents, standardized under regulations like the TILA-RESPA Integrated Disclosure (TRID) Rule, provide transparency regarding loan terms, fees, and charges. The closing appointment is where all necessary legal and financial paperwork is signed by both buyer and seller. This includes the deed (transfers ownership), the mortgage note and deed of trust or mortgage (secure the loan), and the final closing statement.

At closing, remaining purchase funds transfer from the buyer’s lender to the seller, completing the financial exchange. This often involves wire transfers or certified checks handled by the closing agent, ensuring secure movement of sums. Upon completion of paperwork and fund transfers, the buyer receives keys and takes possession of the property. The final administrative step involves recording the deed with the local government, which registers the change in ownership and finalizes the legal transfer.