When a house is under contract, it means that a buyer has made an offer that has been accepted by the seller, and both parties have signed a legally binding agreement known as a contract. This is a significant step in the home buying process, as it signifies that the buyer and seller have agreed to the terms of the sale and are committed to completing the transaction.
Under contract, the buyer typically has a period of time known as the due diligence period to conduct inspections, appraisals, and other necessary checks to ensure the property is in good condition and worth the agreed-upon price. The due diligence period is negotiated between the buyer and seller during the contract negotiation phase.
During this time, the buyer may also be working with their lender to secure financing for the purchase. If the buyer is unable to secure the necessary funding during the due diligence period, the contract may be terminated, and the seller may be able to keep the earnest money deposit made by the buyer.
Once the due diligence period has ended, and any contingencies outlined in the contract have been satisfied, the transaction will move toward closing. At this point, the buyer will provide the remainder of the purchase price, and the seller will transfer ownership of the property to the buyer.
It’s important to note that while a house is under contract, it is not officially sold, and other potential buyers may still submit backup offers. However, backup offers will only be considered if the original contract falls through.
In conclusion, when a house is under contract, it means that the buyer and seller have reached an agreement on the terms of the sale, and both parties are committed to completing the transaction. The due diligence period allows the buyer to make sure they are making a sound investment, and once all contingencies have been satisfied, the transaction will move toward closing.