Under contract in real estate means a seller has accepted a buyer’s offer, but the sale isn’t final yet. Both parties must complete specific conditions called contingencies—like inspections and financing approval—before closing. The deal can still fall through during this period.
You’re scrolling through real estate listings and find your dream home. Your heart races. Then you notice the status: “Under Contract.” Does this mean someone else already owns it? Can you still make an offer? What happens next?
Understanding what “under contract” means can save you time, money, and heartache in your home buying journey. Let’s break down everything you need to know about this critical phase in real estate transactions.
What Under Contract Actually Means
When a home is under contract, it means a buyer has made an offer on the property and the seller has accepted it. Both parties have signed a legal document to purchase the home. Think of it as being engaged rather than married—there’s a commitment, but it’s not final yet.
The under contract phase happens when a buyer and seller have signed a real estate contract but are still completing contingencies to close the sale. This period gives both parties time to fulfill specific obligations before money and keys change hands.
The property hasn’t officially changed ownership at this point. There’s still work to be done, papers to be signed, and conditions to be met. This is why you might still have a chance to swoop in with a backup offer.
The Journey From Active to Under Contract
The first step in a transaction happens when the seller lists the house for sale on the real estate market, including a description, proposed sales price, and other details. The listing shows as “Active” on the Multiple Listing Service, signaling that sellers are ready to receive offers.
Once a seller accepts an offer, the status changes to “Under Contract” or sometimes “Active Under Contract.” This tells other buyers and agents that someone has already stepped forward with an acceptable offer. However, the door isn’t completely closed yet.
The journey from listing to closing typically takes 30 to 60 days, though this varies based on market conditions and the specific terms of the contract. During this time, everyone involved works toward completing the necessary steps to finalize the sale.
Understanding Contingencies
Contingencies are the heart of the under contract period. These are conditions that must be met before the sale can proceed. Think of them as checkpoints along the road to closing.
Home Inspection Contingency
A home inspection contingency gives the buyer a window of time to get the property professionally inspected. The National Association of Realtors estimates that about 75% of buyers include this contingency in their contract. The inspector reviews the exterior and interior structures and systems, including HVAC, electricity, plumbing, and roofing.
If the inspection reveals major issues—like a leaky roof or faulty electrical system—the buyer has options. They can ask the seller to make repairs, negotiate a price reduction, or walk away from the deal entirely without losing their earnest money deposit.
Financing Contingency
For buyers who need a home loan, the purchase agreement should contain a financing contingency stating that the buyer has the right to cancel the contract if they cannot find satisfactory financing. Even if you’re pre-approved, final loan approval isn’t guaranteed until the underwriting process is complete.
This is one of the reasons home sellers prioritize offers made by pre-approved buyers. Pre-approved buyers have had their finances reviewed by a lender to determine if they qualify for a loan and how much they can borrow. This reduces the chances of problems during the financing stage.
Appraisal Contingency
An appraisal is an assessment of a property’s value, according to a licensed real estate appraiser. Lenders require this to ensure they’re not loaning more money than the house is worth. If the appraisal comes back lower than the agreed purchase price, the buyer can renegotiate or cancel the contract.
For example, if you agreed to pay $400,000 but the appraisal values the home at $380,000, your lender won’t approve a loan for the full amount. You’d need to come up with the $20,000 difference, negotiate a lower price, or walk away.
Title Contingency
A title contingency provides the purchaser the right to obtain a title search and raise any objections to the status of the title to the property, which must be cleared by the seller. This ensures you’re buying from the rightful owner and that there are no liens, unpaid property taxes, or legal disputes attached to the property.
Home Sale Contingency
Some buyers need to sell their current home before purchasing a new one. A home sale contingency gives them a specified amount of time to sell their existing property. If they can’t sell within that timeframe, they can cancel the new purchase without penalty.
This contingency protects buyers from having to pay two mortgages simultaneously. However, sellers often view this as a less attractive offer because it adds uncertainty to the timeline.
Under Contract vs Contingent vs Pending
These terms often confuse buyers and sellers, but there are important differences.
Under contract and contingent mean the sale is in the early stages and conditions in the contract are still being worked through. There’s still a chance the deal could fall apart.
Pending means the buyer has either made an offer with no contingencies or signed off on them. All contingencies have been met, and the sale is highly unlikely to fall through. While there’s still a small chance the financing could be denied, you’re better off continuing your house hunt.
Think of it this way: under contract is like the first half of a football game, while pending is the final two minutes with your team ahead by three touchdowns.
Can You Still Make an Offer on a Home Under Contract?
Yes, you can. When a home is under contract, sellers may accept backup offers in case the current deal falls through. Your offer would be second in line, ready to step in if the first buyer can’t complete the purchase.
Around 7% of real estate contracts are terminated, with home inspection, financing, and appraisal issues being the top culprits. So while your chances aren’t great, they’re not zero either.
Have your real estate agent contact the seller’s agent to find out if they’re accepting backup offers. Ask what’s important to the seller so you can craft the strongest possible offer. You might discover that the current deal is shaky—perhaps the buyer has unstable finances or the inspection didn’t go well.
Backup offers can end in disappointment, but it might be worth putting forward your best bid. Just don’t put all your eggs in this basket. Continue searching for other properties while you wait.
How Long Does the Under Contract Period Last?
An inspection contingency period can be anywhere from one to two weeks, while a mortgage contingency lasts between 30 and 60 days on average. The total under contract period typically ranges from 30 to 60 days, depending on the type of deal and how quickly both parties can complete their obligations.
Cash buyers often have shorter timelines because they don’t need to secure financing. Buyers using FHA or VA loans might need more time due to additional requirements from these loan programs.
Why Real Estate Deals Fall Through
According to a survey from the National Association of Realtors, 5 percent of contracts from the last three months of 2024 were terminated before reaching closing. Understanding why deals collapse helps both buyers and sellers navigate this phase successfully.
The most common reason is financing problems. Maybe the buyer’s credit score dropped, they took on new debt, or they lost their job. Even with a pre-approval letter, final loan approval isn’t guaranteed until closing day.
Home inspection issues kill many deals. When inspectors uncover major problems—foundation cracks, mold, outdated electrical systems—buyers often get cold feet. If sellers refuse to make repairs or reduce the price, buyers may exercise their inspection contingency and walk away.
Appraisal issues create problems when the home doesn’t appraise for the purchase price. Lenders won’t loan more than the home is worth, leaving buyers scrambling to cover the difference or renegotiate.
Title problems can tank deals at the last minute. Perhaps there’s an unpaid contractor lien, disputed property boundaries, or inheritance issues that weren’t resolved. Until these clear up, the sale can’t proceed.
Sometimes buyers simply get cold feet. They decide the commute is too long, the neighborhood isn’t right, or they found a better property. While this happens, backing out without a valid contingency means losing their earnest money deposit.
What Happens to Your Earnest Money?
If all contingencies have been met and the buyer chooses to back out anyway, the seller would likely have contractual rights to keep the earnest money. This deposit—usually 1% to 3% of the purchase price—shows you’re serious about buying the home.
If you back out for a reason covered by your contingencies and within the specified timeframes, you’ll get your earnest money back. But if you simply change your mind after contingencies are removed, the seller keeps that money as compensation for taking their home off the market.
Tips for Buyers During the Under Contract Phase
Stay in close contact with your lender. Respond quickly to any requests for additional documentation. Don’t make any major financial changes—no new car loans, credit card debt, or job changes if possible.
Schedule your home inspection promptly. The sooner you know about potential issues, the more time you have to negotiate solutions with the seller.
Read every document carefully before signing. Don’t hesitate to ask your agent or attorney to explain anything you don’t understand. This is likely the biggest purchase of your life—you deserve clarity.
Be prepared to walk away if necessary. While you might love the house, major issues discovered during inspection or financing problems might make it the wrong choice. Trust your contingencies to protect you.
Tips for Sellers During the Under Contract Phase
Keep your home showing-ready until all contingencies are removed. If the deal falls through, you’ll want to attract new buyers immediately.
Respond promptly to buyer requests. Whether it’s providing documentation, scheduling repair assessments, or negotiating terms, quick responses keep the deal moving forward.
Smart sellers keep their home as sale-ready as possible until all the contingencies are removed, in case even the backup deal falls through. Some agents have seen listings go through three buyers before closing.
Consider accepting backup offers. Having a second buyer ready gives you insurance if the primary deal collapses. Just make sure your current buyer knows you’re entertaining backups—transparency prevents legal issues.
Understanding what “under contract” means gives you power in real estate transactions. Whether you’re a buyer trying to snag your dream home or a seller wanting to close the deal smoothly, knowing how this phase works helps you make smarter decisions.
The under contract period protects everyone involved. Buyers get time to ensure they’re making a sound investment. Sellers maintain some flexibility if the deal falls apart. And while it adds complexity to the process, these protections prevent costly mistakes.
If you spot a home under contract that you love, don’t immediately give up hope. Talk to your agent about backup offers. But keep searching too—you don’t want to miss other great opportunities while waiting for a deal that might never materialize.
Remember, under contract isn’t the finish line. It’s more like mile 20 of a marathon. There’s still work ahead, but with the right preparation and guidance, you’ll cross that closing day finish line successfully.
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