When a house is under contract, it simply means that the seller has accepted the buyer’s offer, and both parties are holding up their responsibilities before closing. While it does mean everyone is contractually obligated to hold up their end of the deal, being under contract does not mean the sale is final.
An offer on a home is more than a dollar amount. First, the buyer and seller negotiate a contract in which they work out what they’re willing to cover, what contingencies they want in place, and what they expect of one another before closing. If both agree to the terms and a selling price, they sign their names, and the property is then under contract.
During this period, the buyer will need to produce the earnest money deposit along with a preapproval letter for their loan or mortgage. After this, they enter what is known as the due-diligence period.
This period includes an inspection of the property, an appraisal, and a title search. These stages are in place to ensure that all potential issues have been worked through before reaching the closing table.
How being under contract protects realtors.
Naturally, you’ll ask why a contract is necessary if the sale isn’t final. The reason this contract is in place is to protect the parties involved in the transaction from others wrongfully backing out of the deal.
Say a seller gets a better offer on the home. If it’s under contract, they cannot back out of the current deal. Alternatively, a buyer can’t rightfully back out if they find another home they deem more desirable. The only way anyone can back out is if a contingency allows for it.
You need to remember that the buyer and seller aren’t the only individuals involved, though. In other words, they aren’t the only people protected by the contract. So, if anyone were to wrongfully back out of the contract, it can directly impact the real estate agents, title companies, etc. [Read more…]