Real Estate Investment 101: Getting Started

What Does It Mean When A Home Is Under Contract?

You're searching the local residential real estate company listings. You can't help but notice that virtually every property is "under contract." But they are still listed. Why are they listed and what does it mean?

What Does "Under Contract" Mean?

When used by a residential real estate firm, "under contract" means that an offer has been made and accepted. The home is currently in the process of being sold. A contract has been drawn up for the sale. If the contract is dropped by the seller, the borrower will get their earnest money returned. If the contract is dropped by the borrower, the borrower may forfeit their earnest money. So, a property "under contract" is not off the market, but it's heading there.

A property isn't "under contract" just because it has received offers; it's only contracted once an offer has been accepted.

Can You Make an Offer on an "Under Contract" Property?

Often, you actually can. While it's unlikely the offer will be accepted, many sellers want multiple offers. On the off chance that the first offer falls through, they can then double back to you. If there's a property that you really adore that's currently under contract, you can always ask if they'll accept a backup offer. They can't just cancel the initial offer for you without facing penalties, but they can go to you if the initial offer falls through.

This is why an "under contract" property is still listed. It isn't sold yet, so it still could be sold to someone else.

Why Wouldn't an "Under Contract" Property Get Sold?

There are many real estate transactions that simply fall through. The borrower may not be able to sell their other property in time. They may not be able to secure a loan. Or they night just get cold feet and cancel. If the contract can't be completed, such as by the mortgage not finalizing, the property goes back onto the market. Once it's back on the market, you can make an offer or get your offer accepted.

Ultimately, "under contract" means that you aren't likely to get a property. But it doesn't always mean that you should definitely give up. There are some markets that are hot enough right now that houses are continuously under contract. It can be easier to put in multiple backup offers and to see what happens than to only provide offers to currently active listings.

If you need help while searching the market, contact a residential real estate company today.