What Does Under Contract Mean When Buying a House?

When a house is listed as “under contract,” it means a seller has accepted a buyer’s offer, and both parties have signed a legally binding purchase agreement. The sale is not yet complete, as it typically hinges on specific conditions or contingencies being fulfilled before ownership can officially transfer.

Understanding the Under Contract Status

The “under contract” designation means a formal offer has been accepted and a purchase agreement executed. This agreement outlines the terms of the sale, including price, closing date, and any conditions that must be satisfied. While a contract is in place, the transaction remains subject to various checks and approvals. This status differs from “active,” where the property is available for offers, and “pending,” where contingencies are generally met or waived, and the sale is nearing completion. “Under contract” signals that a deal is in place, but conditions could still cause the agreement to fall through.

Common Contract Contingencies

Contingencies are conditions that must be met for a real estate contract to proceed, allowing either party to withdraw without penalty if these conditions are not satisfied. A home inspection contingency is common, granting the buyer the right to have the property professionally inspected for defects. If significant issues are found, the buyer can negotiate repairs, a price reduction, or terminate the contract and potentially recover their earnest money deposit.

An appraisal contingency protects the buyer if the home’s appraised value is less than the agreed-upon purchase price, which is relevant for buyers relying on mortgage financing. Lenders require an appraisal to ensure the property’s value supports the loan amount. If the appraisal comes in low, the buyer may renegotiate the price with the seller, pay the difference in cash, or, if the contract allows, walk away from the deal.

A financing or loan contingency provides a timeframe for the buyer to secure the necessary mortgage approval. If the buyer is unable to obtain financing within this period, they can cancel the contract and retain their earnest money. A title contingency ensures the seller has clear legal ownership and that there are no undisclosed liens, encumbrances, or disputes that could affect future ownership. A sale of prior home contingency allows a buyer to make their purchase conditional on the successful sale of their current residence.

Key Milestones During the Under Contract Period

The buyer submits an earnest money deposit, often ranging from 1% to 3% of the purchase price, to demonstrate commitment. This deposit is held in an escrow account and becomes part of the buyer’s down payment or closing costs if the sale closes. It can be at risk if the buyer defaults without a valid contingency.

A home inspection is scheduled within 7 to 15 days of contract acceptance. The buyer hires a professional inspector to evaluate the home’s condition. Following the inspection, negotiations for repairs or credits may occur if issues are discovered.

The mortgage lender initiates an appraisal of the property to confirm its market value, typically within one to two weeks of the contract being signed. Simultaneously, the buyer’s loan application moves into underwriting, where the lender assesses financial qualifications.

This underwriting process can take 30 to 45 days. During this time, the lender verifies income, assets, debts, and credit history.

A title search is conducted to ensure a clear title, usually taking one to two weeks. This process identifies any liens, easements, or other claims against the property, which must be resolved before closing.

Title insurance, which protects against future title disputes, is typically purchased by the buyer for the lender. Finally, a day or two before closing, the buyer conducts a final walkthrough to confirm the property’s condition and that any agreed-upon repairs have been completed.

What “Under Contract” Means for Other Buyers

When a home is “under contract,” it means a seller has accepted an offer, but the deal is not yet finalized. For other interested buyers, this status suggests the property is off the primary market, but the opportunity is not always lost. Sellers may still accept “backup offers.”

A backup offer is a secondary offer submitted on a home already under contract. If the initial contract falls through due to unfulfilled contingencies, the backup offer can move into the primary position. Making a backup offer can be a strategic move in competitive markets. It provides a potential path to acquire the desired property without restarting the search.