What Does It Mean When a Home Is Under Contract?

When a home is listed as “under contract,” it signifies a stage in the real estate transaction. This status indicates a buyer has submitted an offer, and the seller has accepted it. While an agreement is in place, the sale is not yet complete, as it is dependent on certain conditions being met before finalization.

Understanding the “Under Contract” Status

The “under contract” designation means a purchase agreement has been signed by both the buyer and the seller. This agreement outlines the terms of the sale, including the price, timeline, and various conditions that must be satisfied before the property changes hands. Unlike an “active” listing, where a home is still openly available for offers, an “under contract” property is off the market because a buyer’s offer has been accepted.

This status differs from “pending,” which indicates that all contingencies have been met, and the transaction is nearing its final closing. While “under contract” suggests a commitment, it acknowledges that the sale’s progression relies on fulfilling specific contractual obligations. Should these conditions not be met, the agreement can be terminated, potentially returning the home to an active listing status. This phase, often lasting several weeks, allows both parties to complete due diligence before the sale becomes final.

Key Conditions for the Sale

Home purchase contracts include several conditions, known as contingencies, which must be satisfied for the sale to proceed. These clauses protect both buyers and sellers by allowing them to withdraw without penalty if specific terms are not met. Understanding these contingencies is important for those involved in real estate.

A financing contingency protects the buyer if they are unable to secure a mortgage for the agreed-upon amount. This clause grants a buyer a period, often 30 to 60 days, to obtain loan approval, ensuring they are not obligated to purchase a home they cannot afford. If financing falls through within this timeframe, the buyer can terminate the contract and retain their earnest money deposit.

An inspection contingency allows the buyer to have the property inspected for defects. If the inspection reveals significant issues, such as structural damage or major system failures, the buyer can negotiate repairs, request a price reduction, or even cancel the contract. This period lasts between 7 to 10 days after the offer is accepted, providing time to review the report and make decisions.

The appraisal contingency protects the buyer if the home appraises for less than the purchase price. Lenders require an appraisal to ensure the property supports the loan, and if it comes in low, the buyer can renegotiate the price or withdraw from the deal without losing their earnest money. A title contingency ensures the seller has clear legal ownership of the property, free from liens or disputes. A title search identifies any issues, which must be resolved before closing for a smooth transfer.

Actions During the Contract Period

Once a home is under contract, both the buyer and seller undertake specific actions to fulfill the agreed-upon conditions. For the buyer, a primary step involves applying for the mortgage, even if pre-approved. This process requires submitting financial documentation, including income, assets, and debt details, to the lender for underwriting. The buyer also schedules and conducts the home inspection, often within the first week or two of the contract period.

Following the home inspection, the buyer reviews the report and may engage in negotiations with the seller regarding any identified repairs or credits. Simultaneously, the buyer arranges for the appraisal, which is ordered by the lender to determine the property’s value. The buyer also reviews seller disclosures about the property’s condition and history. Throughout this period, the buyer’s real estate agent and lender guide them through each step, ensuring deadlines are met and documentation is processed.

On the seller’s side, cooperation is important during this phase. They must prepare the home for inspections, ensuring access for inspectors and appraisers. If the buyer requests repairs based on inspection findings, the seller reviews these requests and decides whether to agree to them, offer a credit, or decline. Providing disclosures about the property is a legal obligation for sellers, ensuring transparency. Communication between both parties, often facilitated by their respective real estate agents, is ongoing as they work through contingency fulfillments, negotiations, and adherence to contractual deadlines.

Moving Towards Closing

Once all contingencies are met or waived, the transaction moves into its final stages, preparing for the official closing. This involves the removal or satisfaction of each condition, signaling the buyer’s commitment to the purchase. With contingencies cleared, the lender performs a final review of the buyer’s financial standing and the property’s value before issuing final loan approval.

A title company plays a role in this phase, conducting a title search to confirm clear ownership and identify any liens. They also prepare and provide title insurance, protecting both buyer and lender against title disputes. Just before the closing date, within 24 to 48 hours, the buyer conducts a final walk-through of the property. This visit ensures the home is in the expected condition, any agreed-upon repairs have been completed, and the seller has vacated the premises.

Closing day marks the process’s culmination, where all parties, or their representatives, gather to sign the paperwork. Funds are transferred from the buyer’s lender and the buyer’s down payment to the seller, and the property’s deed is legally transferred to the new owner. The buyer receives the keys, officially taking possession of their new home. This final step occurs 30 to 60 days after the initial offer acceptance.