What is Under Contract in Real Estate? (+Answer With Simple Explanation): If you have been looking for houses for sale and do not have much experience in the game, it can be a bit difficult to understand some confusing terms and words used in the real estate world. Whether you have driven to the house or found it in online listings, there is a possibility that you have encountered some status that you may not fully understand, so you don’t really know if the house is available or not.
The house is beautiful, cozy, located in a good area but… there is a large sign outside that says “under contract”, and that’s when you get disappointed. But should you be? Maybe not. Here are some key points to understand what the status of houses for sale means.
What do you need to know first (Before understanding the legality of Under Contract)
Buying a house is not the same as buying a TV or clothes. If you thought that you only need to choose the house you want, make an offer and start moving in, it is understandable, but it is a bit far from what it really is. Starting with there are intermediaries in the purchase, such as the bank that accepts the loan, so it is not just a thing of a buyer and a seller.
In each of the steps of the transaction, all parties form an important role and it is crucial that they all agree and they all are on the same page if not, the sale will not materialize.
After the buyer is sure that he or she has found the dreamed home, he or she must make a formal written offer. At this starting point, negotiations begin, this may take a while. When the seller accepts the offer, a contract is signed, which contains additional information to the purchase. The buyer deposits earnest money into an escrow account and then together with a lender, finish tuning the mortgage details. Finally, the house is inspected by a buyer’s trusted inspector and then the deal is closed.
This is clearly a very summarized version of the story.
Under Contract and Sale Pending
If you have understood all the steps explained above, you are closer to understanding the differences between these two terms, so do not despair, we are almost there.
Although the use of these terms may vary according to the needs of the seller, they usually mean the following:
At the moment in which the seller has accepted the offer of the buyer and they have signed a contract, but earnest money has not yet been deposited as collateral, the status of the property is considered under contract.
When all the requirements for the purchase have already been completed, that is, when the mortgage has been accepted by the lender, and only the proper inspections of the house need to be done to proceed to close the deal, at that point, the status is sale pending.
As you can see, a pending sale is a much more advanced state of sale.
As mentioned earlier, these terms can be used in different ways for several purposes, this may vary between regional markets. In case of doubt, it is advisable to ask the agent in charge directly.
The question you are asking: is it too late to bid?
If we talk about a pending sale, it is likely that it is already a little late. Many aspects of the purchase and the house have already been reviewed and refined by then, so the chances of the purchase falling apart are not very high.
Now, if the status is under contract, do not hesitate to make an offer. There is still a lot to see and negotiations have barely begun, so the purchase is not completely secure, so agents will not stop receiving offers.
The final recommendation is that you do not let your home go dreamed just for a sign. You don’t lose anything trying!
Frequently Asked Questions:
How long can a house be under contract?
45 days. Still, it is not fixed of 45 days; it can be a few days less or more; but generally, we consider it 45 days.
Can you make an offer on a house that is under contract?
Yes, you can make it. It will be more of bidding at a greater price. It is also called a Backup offer. Here you can read more: How to Put an Offer on a House That’s Already Under Contract
Expert YouTube Videos
What Does “Under Contract” Mean? (Real Estate) – By UTRealEstateInfo
Under Contract… Now What? – By BiggerPockets
How to Get the Deal Under Contract with a Risk-Free Offer – By Phil Pustejovsky
How To Get A Hot Deal Under Contract – By Kris Krohn