What Does It Mean When a House Is Under Agreement?

When you’re in the market for a new home, you may come across listings that say “under agreement” or “under contract.” But what does it mean when a house is under agreement? This status indicates that the seller has accepted an offer from a buyer, but the sale hasn’t closed yet.

In the world of real estate, clarity is key. Take the phrase “under agreement,” for example. Understanding exactly what that entails can make all the difference for buyers and sellers looking to stay one step ahead in the transaction process.

Ever wondered what it means when a house is under agreement? We’re about to demystify the process. From the lead-up to the aftermath, we’ll explore every aspect of this crucial stage.

Key takeaway

• If you’ve found your dream home but it’s already under contract, don’t give up hope – make a backup offer. It’s a win-win for both buyers and sellers, providing a safety net in case the first deal falls through and potentially sparking a bidding war for a higher sale price.

What Does It Mean When a House Is Under Agreement?

You’re scanning the real estate listings, and suddenly, you see “under agreement” or “under contract.” What does it mean? In a nutshell, a buyer has submitted a winning offer, and the seller has given the thumbs-up, but the paperwork isn’t quite done.

The terms “under contract,” “under agreement,” “sale pending,” and “active under contract” are often used interchangeably in real estate. They all indicate that the seller has a signed, accepted real estate contract with a potential buyer. However, that doesn’t necessarily mean the property is off the market.

Under Contract vs. Sale Pending

While “under contract” and “sale pending” are similar, there’s a slight difference. A property is “under contract” when a buyer has made an offer and the seller has accepted it, but the transaction hasn’t closed. The property remains under contract until all contingencies are met.

On the other hand, “sale pending” means all contingencies have been removed and the deal is almost complete. At this point, the property is no longer considered active in the multiple listing service (MLS).

Active Under Contract Status

In some cases, a property may be “active under contract.” This means the seller has accepted an offer with contingencies, but is still showing the property and accepting backup offers. Why? Because there’s always a chance the current contract could fall through.

For example, let’s say a buyer makes an offer on their dream house that’s contingent on selling their current home. If they’re unable to secure financing within the specified time frame, they can back out of the contract and the seller can move on to the next buyer.

Common Contingencies in Real Estate Contracts

Most purchase contracts include contingencies that must be met before the sale can close. Here are some of the most common:

• Inspection contingencies: Allow the buyer to have the property inspected and request repairs or negotiate price based on the findings.
• Financing contingencies: Protect the buyer if they’re unable to secure a mortgage.
• Appraisal contingencies: Allow the buyer to renegotiate or back out if the appraisal comes in lower than the sale price.
• Home sale contingencies: Make the purchase contingent on the buyer selling their current home.

If any of these contingencies aren’t satisfied, the contract can be terminated and the earnest money is typically returned to the buyer. So, even when a property is under contract, there’s no guarantee the deal will go through.

Can You Still Make an Offer on a House That’s Under Contract?

You’ve fallen in love with a house, but it’s already under contract. While you may think all hope is lost, there’s still a chance you could snag the property. Many sellers will continue to show the home and accept backup offers, just in case the first deal falls through.

Benefits of Making a Backup Offer for Buyers and Sellers

Backup offers can be a win-win for both buyers and sellers. For buyers, it’s a chance to get their foot in the door, even if they weren’t the first offer accepted. If the initial contract falls through, the backup offer takes its place.

Sellers who are open to accepting backup offers often reap surprising benefits.

• It provides a safety net in case the first contract doesn’t close.
• It can lead to a bidding war and a higher sale price.
• It reduces the time the property sits on the market if the first deal falls through.

Steps to Putting an Offer on a House Under Contract

Making a backup offer can be a smart move. But before you take the plunge, take a look at these essential steps.

1. Have your agent confirm the seller is accepting backup offers.
2. Submit your offer with a “backup offer addendum.”
3. Provide an earnest money deposit to show you’re serious.
4. Wait to see if the first contract falls through.
5. If the first deal terminates, your backup offer becomes the primary contract.
6. Proceed with inspections, appraisal, and closing as normal.

Keep in mind that making a backup offer doesn’t guarantee you’ll get the house. But if the first deal crumbles, you’ll be next in line to purchase the property.

How Often Do Real Estate Contracts Fall Through?

It’s every buyer and seller’s worst nightmare – the deal falls through at the last minute. Unfortunately, it happens more often than you might think. According to the National Association of Realtors, about 4% of real estate contracts are terminated before closing.

Common Reasons Why Contracts Don’t Make It to Closing

There are many reasons why a real estate contract might not make it to the closing table:

• Buyer’s remorse or cold feet
• Home inspection reveals major problems
• Appraisal comes in lower than the sale price
• Buyer can’t secure financing
• Contingencies like selling the buyer’s current home aren’t met
• Delays push the closing past the contract deadline

Whatever the reason, a broken contract is always disappointing for everyone involved. The buyer loses out on their dream home, the seller has to start the process over, and the real estate agents miss out on their commission.

What Happens If the First Deal Falls Through

If the first accepted offer falls through, the seller has a few options. If there are backup offers, the seller can move on to the next one in line. The backup offer essentially takes the place of the current contract.

If there are no backup offers, the seller will have to put the property back on the market. The listing status will change from “under contract” or “pending” to “active” in the MLS. Then the seller can continue to show the property and accept new offers.

A contract fall through can be a real disappointment, but having a backup offer in place can soften the blow. This safety net gives sellers a second chance to sell and buyers another opportunity to purchase the property.

When Is the Best Time to Make an Offer on a House Under Contract?

You know you can make a backup offer on a house under contract, but when is the best time to do it? While you can submit a backup offer any time before the sale closes, there are certain windows of opportunity that may increase your chances of success.

Factors to Consider Before Making a Backup Offer

To avoid potential pitfalls, carefully consider the implications of making a backup offer.

• How much do you want the house? Is it worth waiting for?
• What’s your timeline for moving? Can you wait out the first buyer?
• Are there other properties you’re interested in pursuing instead?
• What are the terms of the current contract? When are the deadlines for contingencies?
• Can you afford to offer more than the current contract price?
• How motivated is the seller? Are they likely to stick with the first buyer or consider backups?

Answering these questions can help you determine if making a backup offer is the right move. If you’re on a tight timeline or budget, it may be better to move on to another property. But if it’s your dream home, it may be worth the wait.

Timing Your Backup Offer for the Best Chance of Success

Timing is everything when it comes to real estate. If you’re going to make a backup offer, aim for the early stages of the first contract. This is typically during the due diligence period, before the buyer has removed all their contingencies.

The clock starts ticking the moment you sign your contract. If you act fast, you can…

• Get your foot in the door before the first deal is finalized.
• Take advantage if the first buyer gets cold feet after inspections reveal issues.
• Have your offer in hand if appraisal or financing issues arise.
• Possibly negotiate better terms if the seller is motivated to switch buyers.

Keep in mind that most contracts have a specific time frame for the buyer to complete their due diligence. If the first buyer removes all contingencies, the sale is very likely to close. So if you wait too long to make your backup offer, you may miss your chance.

The key is to work with your real estate agent to understand the terms of the current contract. They can help you time your backup offer for the best chance of success. And if the first deal does fall through, you’ll be ready to step in as the next potential buyer.

Conclusion

Navigating the world of real estate can be challenging, especially when you encounter terms like “under agreement.” But by understanding what it means when a house is under agreement, you can make more informed decisions as a buyer or seller.

Remember, a house under agreement isn’t a done deal. There are still several steps to complete before the sale is final, and there’s always a chance the contract could fall through.