What Does Under Contract Mean on a House for Sale?

A property listed as “under contract” indicates a significant phase in the real estate process, signaling that a buyer and seller have formally agreed to a purchase. This status means an offer has been accepted and a legally binding contract has been signed. While the property is effectively off the active market, the transaction is not yet complete and remains subject to certain conditions that must be fulfilled before the sale can finalize.

Defining “Under Contract”

“Under contract” signifies a formal, written agreement between a buyer and seller for a property’s sale. This agreement outlines the terms and conditions, including the price. While the property is removed from active listings, indicating commitment from both parties, the sale is not yet closed. For the buyer, this means commitment to purchase if conditions are met. For the seller, it confirms an agreement is in place, awaiting condition satisfaction to proceed toward closing.

Key Contingencies in the Contract

Most real estate contracts include specific conditions, known as contingencies, that must be satisfied for the sale to proceed. These clauses protect both the buyer and seller, allowing them to withdraw from the agreement without penalty if certain criteria are not met. A common protection is the inspection contingency, which permits the buyer to hire a professional inspector. If significant issues are discovered, the buyer can request repairs, negotiate a credit, or terminate the contract.

Another frequent condition is the financing contingency, which safeguards the buyer if they are unable to secure loan approval. If their mortgage application is denied, they can exit the contract without losing their earnest money deposit. The appraisal contingency ensures the property’s value, as determined by a licensed appraiser, meets or exceeds the purchase price, which is often a requirement for mortgage lenders. A sale of existing home contingency might also be included, making the current purchase dependent on the successful sale of the buyer’s current residence within a specified timeframe.

The Transaction Process While Under Contract

Once a property is “under contract,” a series of procedural steps guide the transaction toward its final closing. An initial step involves the buyer submitting an earnest money deposit, usually 1% to 3% of the purchase price, to demonstrate serious intent. This deposit is held in an escrow account by a neutral third party, such as a title company or real estate brokerage, until closing. The buyer then schedules a home inspection, with the report often available within a few days.

During this period, if the buyer is obtaining a mortgage, their lender will order an appraisal to confirm its market value. This appraisal process typically takes one to two weeks. Concurrently, the buyer’s loan application moves into underwriting, where the lender verifies income, assets, and creditworthiness to approve the mortgage. A title search is also conducted to ensure there are no liens, encumbrances, or other issues that could affect the transfer of clear ownership. These collective actions, managed by escrow or closing agents, work to satisfy the contract’s conditions before the final transfer of ownership.

Can Another Buyer Still Make an Offer?

While a property is “under contract,” an offer has been accepted, and the seller is working with the initial buyer to fulfill contract conditions. However, a seller may still entertain or accept “backup offers.” A backup offer is a secondary offer made on a home already under contract, providing a safety net if the primary deal falls through due to unmet contingencies or other issues. If the initial contract terminates, the backup offer can become the primary agreement without re-listing the property.

It is important to distinguish “under contract” from “pending” status, though the terms are sometimes used interchangeably. “Pending” indicates all contingencies have been met or waived, and the sale is closer to closing, making it less likely for a backup offer to be considered. Properties listed as “active under contract” explicitly signal the seller is open to receiving backup offers. While most “under contract” deals proceed to closing, submitting a backup offer can still be a strategic option for interested buyers.