Connect with us

Real Estate

What Does It Mean When a House Is Under Contract?

Discover what it means when a house is under contract in our comprehensive guide. Learn about key stages, contingencies, earnest money, and the closing process to navigate real estate transactions successfully.

What Does It Mean When a House Is Under Contract

Navigating the real estate market can be a complex endeavor, filled with jargon and processes that may seem daunting to both buyers and sellers.

One term that frequently comes up and often causes confusion, is "under contract."

So, what does it mean when a house is under contract? This phrase marks a critical stage in the home buying and selling process, indicating that both parties have agreed on terms and are moving forward with the transaction.

In this comprehensive article, we will demystify what it means when a house is under contract, explore the key stages and implications, and provide valuable insights to help you successfully navigate this important phase in real estate transactions.

The under contract status indicates that a buyer has made an offer on a property and the seller has accepted it.

This agreement is typically documented in a sales contract, which outlines the terms and conditions of the sale.

Once both parties have signed this contract, the house is considered to be under contract.

While the house is under contract, it is crucial to note that the buyer is given a certain period, known as the contingency period, to conduct inspections, appraisals, and other necessary due diligence.

During this time, the buyer has the opportunity to back out of the contract if any issues are discovered that are deemed unacceptable.

Key Stages and Implications of Being Under Contract

Being under contract involves several key stages and implications. Let's explore them in detail:

Contingencies Period

The contingency period is a crucial phase that occurs once the house is under contract.

It provides the buyer with an allotted time to perform inspections and assessments to ensure the property meets their expectations. This period allows the buyer to gain a comprehensive understanding of the property's condition and identify any potential problems.

Some common contingencies during this period include:

Home inspection contingency: The buyer hires a professional home inspector to evaluate the property's condition and identify any issues. This inspection covers various aspects, including the structural integrity, electrical systems, plumbing, and overall safety of the property.

Appraisal contingency: The buyer's lender orders an appraisal to determine the property's market value. This appraisal helps ensure that the buyer is not overpaying for the property and that it aligns with the loan amount.

Financing contingency: The buyer ensures they secure the necessary financing to purchase the house. This contingency ensures that the buyer can obtain a mortgage loan or other means of financing to complete the purchase.

Title contingency: The buyer and their attorney review the property's title history to ensure there are no liens or legal issues. This review ensures that the property has a clear title and that the buyer will have rightful ownership without any unforeseen complications.

If any problems arise during the contingency period, the buyer has the option to negotiate repairs, request a reduction in price, or even withdraw from the contract.

This period protects the buyer's interests and allows them to make informed decisions based on the property's condition and any issues that may arise.

Earnest Money

Once a house is under contract, the buyer is typically required to provide earnest money as a show of good faith.

Earnest money is a sum of money deposited into an escrow account or held by a neutral party, such as a real estate agent or attorney.

The purpose of this money is to demonstrate the buyer's seriousness about purchasing the property.

The amount of earnest money can vary depending on the market and the agreed-upon terms between the buyer and seller.

It is usually a percentage of the purchase price, typically ranging from 1% to 3%. The earnest money is held until the closing process is completed.

If the buyer successfully closes on the house, the earnest money is typically applied towards the down payment or closing costs.

However, if the buyer fails to fulfill their obligations outlined in the contract, the seller may be entitled to keep the earnest money as compensation for their time and effort.

The earnest money acts as a form of security for the seller, ensuring that the buyer is committed to completing the transaction.

Negotiations and Amendments

While the house is under contract, negotiations and amendments may occur. These can arise due to various factors, such as inspection issues, financing challenges, or changes in the buyer's circumstances.

Both parties may agree to amend the contract to address these changes, ensuring a fair and satisfactory resolution.

Negotiations and amendments can cover a wide range of aspects, including repairs, price adjustments, timelines, or even contingencies.

The goal is to find a mutually beneficial solution that allows the transaction to proceed smoothly. It is essential for both buyers and sellers to work closely with their respective real estate agents or attorneys during this stage to navigate any necessary negotiations and amendments effectively.

Closing process

Once all contingencies have been satisfied and any negotiations or amendments have been resolved, the closing process begins.

This involves the finalization of all legal and financial aspects of the sale. The buyer will typically secure their financing, obtain insurance, and coordinate with a title company to ensure a smooth transfer of ownership.

During the closing process, the buyer and seller sign various documents, including the settlement statement, which details all financial transactions related to the sale.

This statement outlines the purchase price, closing costs, prorated taxes, and any other applicable fees.

Additionally, the buyer will provide the necessary funds for the down payment and closing costs.

Once all paperwork is completed, the buyer receives the keys to the property, and the sale is officially closed. The buyer becomes the official owner of the property, and the seller receives the proceeds from the sale.


The real estate market is filled with terminology that can often be confusing for both buyers and sellers. One term that frequently arises is "under contract," and it comes with its own set of questions and implications.

To help you navigate this crucial stage in the home buying or selling process, we've compiled a list of commonly asked questions related to what it means when a house is under contract.

Whether you're a first-time homebuyer or an experienced seller, these answers will provide valuable insights to guide you through your real estate journey.

What’s the difference between pending and under contract?

Both "pending" and "under contract" statuses indicate that the seller has accepted an offer from a buyer. However, the key difference lies in the contingencies. In an "under contract" status, there are usually contingencies that still need to be met, such as home inspections or financing. On the other hand, a "pending" status generally means that most, if not all, contingencies have been satisfied, and the sale is just awaiting the final closing process.

Can you make an offer on a house that is active under contract?

Yes, you can make an offer on a house that is "active under contract." In this status, the seller has accepted an offer but is still open to receiving backup offers. If the initial deal falls through due to unmet contingencies or other issues, the seller may consider your backup offer. However, it's essential to consult with your real estate agent for the best course of action in such scenarios.

What is the difference between under contract and sold?

When a house is "under contract," it means that the seller has accepted an offer, but the sale is not yet finalized. There are usually contingencies that need to be met, such as inspections or financing. Once all contingencies are cleared, and the closing process is complete, the status changes to "sold," indicating the transfer of property ownership from the seller to the buyer.

What does it mean when a house is under contract on Zillow?

When a house is listed as "under contract" on Zillow, it signifies that the seller has accepted an offer from a buyer, but the sale has not yet been finalized. This status means that there are likely contingencies that need to be satisfied before the sale can close. These could include home inspections, appraisals, or securing financing. While the house is under contract, it is generally taken off the market, but backup offers may still be considered.

The bottom line

In summary, when a house is under contract, it means that a buyer has made an offer on the property and the seller has accepted it.

This stage in the home buying process involves a contingency period during which the buyer conducts inspections and assessments.

Earnest money is typically provided by the buyer, and negotiations and amendments may occur to address any issues that arise.

Finally, the closing process concludes the sale, and the buyer becomes the official owner of the property.

Understanding the implications of being under contract is crucial for both buyers and sellers to navigate the home-buying process successfully.

By being aware of the various stages and procedures involved, individuals can make informed decisions and ensure a smooth and satisfactory transaction.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest blog posts

More in Real Estate