What It Means When a House Is Under Contract: Explained by Real Estate Experts

What It Means When a House Is Under Contract: Explained by Real Estate ExpertsYou've found the perfect home, but now you see that it's listed as "under contract." Does this mean you've missed your chance? Not necessarily. Understanding what "under contract" means can help you navigate the real estate market with confidence. Let's dive into the details.

What Does "Under Contract" Really Mean?

When a house is under contract, it means that both the buyer and seller have agreed to the terms and conditions of a contract for the sale of the home. This agreement is legally binding once both parties have signed the contract and the buyer has deposited earnest money.

What is Earnest Money?

Earnest money is a deposit made by the buyer to demonstrate their serious intent to purchase the property. In Texas, this amount is typically around 1% of the home's sale price. Earnest money is credited toward the buyer's closing costs and is forfeited if the buyer backs out of the contract without a valid reason.

What Happens After a House Is Under Contract?

For the buyer, being under contract means completing due diligence on the property. This includes scheduling inspections, reviewing disclosures, and finalizing financing. Buyers should avoid making large purchases on credit, as this can impact their financing options.

For the seller, being under contract means completing necessary repairs and keeping the home in showing condition. Sellers should also be prepared for the possibility of the deal falling through and be open to entertaining backup offers.

Submitting a Back-Up Offer

If you're interested in a home that's already under contract, you can still submit a backup offer. If the primary contract falls through, the seller may consider the backup offer. However, the seller is not obligated to accept a backup offer.

Under Contract Doesn’t Mean Unavailable

While a property may be listed as under contract on a property search site, this information may not be up-to-date. It's best to work with a real estate agent to get the most current status information on a home you're interested in.

Being under contract means that a home sale is in progress, but it's not yet final. Understanding this process can help both buyers and sellers navigate the real estate market with confidence.

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