What does "Under Contract" mean in Real Estate?
Welcome to Unreal Estate's guide on understanding the term "Under Contract" in real estate. If you've ever been in the process of buying or selling a property, you've likely come across this term. But what does it actually mean? And what steps should you take if you're considering a property that is currently "Under Contract"? We'll answer all of these questions and more in this comprehensive guide.
When someone makes an offer on a house but hasn't exchanged contracts yet, it means the property is "Under Contract." This means that the seller has received an offer, but the deal is not yet finalized. The process of making an offer on a property can be complex and involves various steps, including negotiating the price, making a deposit, and obtaining the finances. In this guide, we'll explain what it means when a property is "Under Contract" and why you can still have a chance of buying a property that has been "Under Contract."
One thing to keep in mind is that the term "Under Contract" can have different meanings in different locations. In Illinois, "Under Contract" means that the buyer's broker has submitted an offer on behalf of their client. This is different from New York, where "Under Contract" or “Active with Contract” means that the seller has accepted the offer but it is not yet legally binding until the parties’ attorneys draft a final contract. It's important to understand the specific terminology used in your location, as this can impact the process of making an offer on a property.
When making an offer on a property, it's common for buyers to make a contingent offer. This means that the offer is subject to certain conditions being met before the sale can move forward and be completed. Some common contingencies include "subject to finance," "subject to sale," and "subject to building & pest inspection." These contingencies are put in place to protect the buyer and ensure that they are able to obtain financing and that the property is in good condition. It's important for potential buyers to be aware of all contingencies that must be met before final sale, as this can impact the likelihood of the sale going through.
In some areas, like New York or Illinois, once the terms of the offer are finalized and the contracts are executed, there is usually a cooling-off period or an attorney review. The length of this period varies from state to state, ranging from three to five days. During this time, interested buyers can express interest in the property if the current deal falls through. It's important for buyers to be aware of any potential cooling-off periods or penalties they may face if they pull out at any stage during the process. In some cases, buyers may be required to pay a penalty fee if they withdraw during the cooling-off period.
The executed contract marks the official acceptance of the offer and the start of the contract period. This is a crucial step in the process, as it signifies that both parties are committed to the sale. After the contract is executed, the final step is settlement, where the buyer pays the remainder of the contract price and gains ownership of the property.
Even if a property is listed as "Under Contract," interested buyers still have the opportunity to put in an expression of interest for purchase if something falls through with the current buyer's agreement. If you're considering a property that is "Under Contract," here are a few tips for expressing interest:
Communicate with the seller or their agent. Let them know that you are interested in the property and ask if they would be open to considering another offer.
Be prepared to make a strong offer. If you're serious about purchasing the property, you'll need to be prepared to make a competitive offer. This may include offering a higher price, making a larger deposit, or waiving certain conditions.
Be prepared to move quickly. If you're interested in a property that is "Under Contract," you'll need to act quickly. The seller may be in advanced negotiations with another buyer, so you'll need to be prepared to move forward with your offer as soon as possible.
If you're considering purchasing a property, there are a few key things you should keep in mind:
Get mortgage pre-approval. Before making offers on homes, it's important to get mortgage pre-approval. This will give you an idea of how much you can afford to borrow and will make the process of buying a property much smoother.
Have property inspections done. Before exchange of contracts, it's a good idea to have property inspections done to ensure that the property is in good condition. This can help to identify any potential issues that may need to be addressed before the sale goes through.
Seek legal advice. When making major purchases like real estate, it's always a good idea to seek legal advice. We are not attorneys and do not offer legal advice. A lawyer can help to ensure that your interests are protected and that the process of buying a property goes smoothly.
In conclusion, understanding the term "Under Contract" and the process of making an offer on a property is crucial for anyone considering buying or selling a home. Whether you're a first-time homebuyer or an experienced real estate investor, it's important to be aware of all the steps involved in the process and to be prepared to act quickly if you're interested in a property that is "Under Contract." We hope this guide has provided a helpful overview of what "Under Contract" means and how to navigate the process of making an offer on a property.
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