Understanding Under Contract in Real Estate Transactions

When navigating the real estate market, you may come across the term "under contract." This phrase can be confusing for both buyers and sellers, as it signifies a crucial stage in the property transaction process. Understanding what it means can help you make informed decisions whether you're looking to buy or sell a home.

What Does Under Contract Mean?

In real estate, when a property is labeled as "under contract," it indicates that the seller has accepted an offer from a buyer, and both parties have agreed to the terms of the sale. However, the transaction is not yet finalized, as several steps must be completed before the sale is officially closed.

The Process of Going Under Contract

Here’s a brief overview of the steps involved in going under contract:

1. Offer Submission: A buyer submits an offer to purchase the property, often through their real estate agent.

2. Negotiation: The seller reviews the offer and may negotiate terms, including price, contingencies, and closing dates.

3. Acceptance: Once both parties agree on the terms, the seller accepts the offer, and the property goes under contract.

4. Due Diligence: The buyer typically conducts inspections and secures financing during this period.

5. Closing: If all conditions are met, the transaction proceeds to closing, where ownership is transferred.

Key Terms to Know

Understanding some key terms related to being under contract can help clarify the process:

• Contingencies: Conditions that must be met for the contract to be valid, such as financing or inspection contingencies.

• Earnest Money: A deposit made by the buyer to demonstrate their commitment to the purchase.

• Closing Date: The date when the property ownership is officially transferred to the buyer.

Potential Pitfalls

While being under contract is a significant step, it doesn't guarantee a sale. Here are some common mistakes to avoid:

• Failing to meet contingencies, which can lead to contract termination.

• Not communicating effectively with your real estate agent, which can cause misunderstandings.

• Underestimating the time it takes to complete due diligence and secure financing.

Conclusion

Being under contract is an essential phase in the real estate buying and selling process. It indicates that a property is in the process of being sold, but it’s crucial to understand that several steps remain before the deal is closed. For more insights into real estate transactions, consider exploring resources like Goliath Data.