Property Listing: What Does Under Contract Mean in Real Estate?

When searching for a home in a real estate market, there are many labels and categories to learn about if you want to buy your dream home. You need to know about pending listings, contingencies, and contracts, and we are here to guide you through the entire learning process. So, what does under contract mean in real estate?

A real estate listing includes many important details about the home being sold. One of those details is whether the seller is under contract. This term refers to the fact that the seller had accepted the offer and both parties had agreed to the terms of the sale.

There are several types of contracts for purchasing and selling homes. Some require the buyer to pay cash, while others allow the buyers to use a mortgage loan. If the buyer wants to make repairs or improvements to the property, they might ask the seller to pay for some parts.

In any case, we’ll go in-depth about home purchasing, the steps that take you to closing, and listings that you should and should not put an offer on. All that should clearly answer your question: what does under contract mean in listings?

Detailed Steps of Property Purchase

Whether you are a seller or a buyer, you want to reach an agreement about the sale - you either want to sell it for top dollar or buy it in a good state for as little money as possible. The two often don't go together, so the whole process of home buying/selling is about compromising.

There are many steps, big and small, that both the buyer and seller must overcome to reach their goal. In this article, we'll skip over to putting the offer. The first step towards closing is creating a good offer and the seller accepting it.

Sellers' reasoning behind accepting it can be various: pricing, waived contingencies, even the likability of the buyers.

Upon acceptance, both parties sign the sale contract and the property is no longer active. It can be active under contract, which means that the seller accepts back-ups, but the signed buyer has the priority.

The sale contract has contingency clauses, such as inspection, title, or appraisal clause. The period during which the contingencies are met is called contingency period. If everything goes according to the sales agreement, the property is now waiting for some final checks and negotiations, before being sold to its new owners - during that time the listing is pending.

The Difference Between Under Contract and Pending

The stage of the property's selling process determines whether a listing is under contract or pending, among other things. If it’s pending, it is much closer to closing, while being under contract merely means that the seller has accepted the offer and signed the contract.

Signed contracts usually include conditions for both parties. If those conditions aren't met when they are due, the contract can be broken. When that happens, the property comes back as actiive listing.

Active under contract means that both sides agree to all terms of the contract. A sale pending means that the seller agreed to sell the property to a specific buyer.

More About Pending Listings

A pending sale means that the owner has agreed to sell the home to a buyer. The contract has been signed and all conditions have been met. Those conditions are formulated in the contract in the form of contingencies.

A contingency clause gives both buyers and sellers an opportunity to walk away from a deal if certain conditions aren't met. When the sale is pending it is very close to closing and there is no legal requirement for sellers to accept an offer.

However, most agents recommend accepting offers on homes that are pending because they want to make sure the seller gets the best possible deal.

Additionally, you have every right to put an offer to a pending listing, but there is no guarantee that the seller will except it. Sometimes, the seller will accept a less expensive offer than what is listed on MLS. This could happen if the seller is trying to move quickly and doesn't care about getting the highest price.

Can Under Contract Listing Become Active Again?

Compared to a pending listing, a property under contract has more chances to go back to an active listing status. That is because some contingencies are not met or it takes too much time to meet them.

The number of house that go out of contract depend on the market. If the competition is too high and the supply too low, the buyer will be more willing to let it slide, when it comes to repairs, appraisal mismatches, or other issues. Contract cancellations are less likely to happen in that market climate.

However, in a market where the buyer has more power - less demand, more houses on the market - contracts are cancelled more often. This is important to remember especially when you see a house you like, but it’s under contract. Whether or not you have a chance of buying it will depend on the local market situation.

Can I Buy a House Under Contract

Short answer - yes. But it depends solely on your luck and the market conditions. Okay, and a little on the way you put a back-up offer. A back-up has to be better than the original in the eyes of the seller.

Pros and Cons of a Back-Up Offer

As stated before, you have every right to put an offer to a house under contract, and the seller has the right to accept backup offers. There are pros and cons to back ups, for you as a buyer. The main advantage is the fact that of the seller takes your offer as a back-up, you'll be the first in line in case of a contract cancellation.

However, you might be investing the time and energy into a property that someone else will buy. It might be smarter to search for an active listing, than to put an offer and earnest money, and wait for a response that might be negativne.

Your earnest money can be trapped until either the cancellation or closing. You could find another listing during that time that you might like better.

How to Avoid a Complicated Selling Process?

Sellers don't enjoy the home selling process any more or less than buyers do. That is why SleeveUp Homes came up with the way to make it easier on you to sell your property, and still for a top dollar.

We buy your house as-is. Meaning no repairs, no paint Jobs, you don't even have to mow the lawn. Just contact us and request an offer, we guarantee $10,000 more than others.

Author:

Zachariah Peterson , CMO /

Zach has broad experience in marketing, technology, and finance, and he has held leadership positions at multiple startups since 2017.

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