When you’re in the process of buying or selling a property, you’ll come across the term “under contract.” But what does it mean? Essentially, it means that a legally binding agreement has been made between the buyer and seller. In this article, we’ll take a closer look at what it means to be under contract, what happens during this period, and what you need to know as a buyer or seller.
Section 1: Understanding the Under Contract Status
When a property is listed as “under contract,” it means that a buyer has made an offer on the property, and the seller has accepted that offer. However, the sale is not yet final. During this period, the buyer will typically have a set amount of time to complete any inspections or appraisals and secure financing. If any issues arise during this period, the buyer may have the right to back out of the sale.
It’s important to note that while a property is under contract, it is not available for other buyers to make offers. The seller is legally bound to sell the property to the buyer who has made the accepted offer, assuming all contingencies are met.
Section 2: What Happens During the Under Contract Period?
Once a property is under contract, the buyer will typically have a set amount of time to complete any inspections or appraisals. This is known as the due diligence period. During this time, the buyer can back out of the sale if they find any issues with the property that they are not comfortable with.
The buyer will also need to secure financing during this period. If they are unable to secure financing, they may be able to back out of the sale without penalty. However, if they are able to secure financing but choose to back out of the sale for another reason, they may forfeit their earnest money deposit.
If everything goes smoothly during the due diligence period, the sale will move forward to closing. At closing, the buyer will sign all of the necessary paperwork and pay any remaining fees or costs associated with the sale. Once the sale is complete, the property will be officially sold, and the status of the property will change from “under contract” to “sold.”
Section 3: What You Need to Know as a Buyer
As a buyer, it’s important to understand what it means to be under contract. Once you make an offer on a property and it is accepted, you will typically have a set amount of time to complete any inspections or appraisals and secure financing. During this time, it’s important to work closely with your real estate agent and lender to ensure that everything goes smoothly.
If you find any issues with the property during the due diligence period, you may be able to back out of the sale without penalty. However, if you choose to back out of the sale for another reason, you may forfeit your earnest money deposit.
Section 4: What You Need to Know as a Seller
As a seller, it’s important to understand that once your property is under contract, it is legally bound to sell to the buyer who has made the accepted offer. During this period, it’s important to work closely with your real estate agent to ensure that everything goes smoothly.
If the buyer finds any issues with the property during the due diligence period, they may be able to back out of the sale without penalty. However, if they choose to back out of the sale for another reason, you may be entitled to keep their earnest money deposit.
Conclusion
In conclusion, being under contract means that a legally binding agreement has been made between the buyer and seller. During this period, the buyer will typically have a set amount of time to complete any inspections or appraisals and secure financing. If everything goes smoothly, the sale will move forward to closing, and the property will be officially sold. As a buyer or seller, it’s important to understand what it means to be under contract and work closely with your real estate agent to ensure that everything goes smoothly.
